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Investments glossary

Qualified Dividend

A qualified dividend is a dividend that falls under capital gains tax rates that are lower than the income tax rates on unqualified, or ordinary, dividends. Dividend tax rates for ordinary dividends (typically those that are paid out from most common or preferred stocks) are the same as standard federal income tax rates, or 10% to 37% for the most recent tax year. By comparison, qualified dividends are taxed as capital gains at rates of 20%, 15% or 0% depending on tax bracket. Because of this discrepancy in rate, the difference between ordinary vs. qualified dividends can be substantial when it comes time to pay taxes.

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