Qualified Dividends

Enter your total qualified dividends on line 3a. Qualified dividends are also included in the ordinary dividend total required to be shown on line 3b. Qualified dividends are eligible for a lower tax rate than other ordinary income. Generally, these dividends are shown in box 1b of Form(s) 1099-DIV. If you are including your child’s qualified dividends in the total on line 3a, check box 1 on line 3c. For more information, see the Instructions for Form 8814. See Pub. 550 for the definition of qualified dividends if you received dividends not reported on Form 1099-DIV.

Exception.

Some dividends may be reported as qualified dividends in box 1b of Form 1099-DIV but aren’t qualified dividends. These include the following.

Dividends you received as a nominee. See the Schedule B instructions.

Dividends you received on any share of stock that you held for less than 61 days during the 121-day period that began 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock isn’t entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock but not the day you acquired it. See the examples that follow. Also, when counting the number of days you held the stock, you can’t count certain days during which your risk of loss was diminished. See Pub. 550 for more details.

Dividends attributable to periods totaling more than 366 days that you received on any share of preferred stock held for less than 91 days during the 181-day period that began 90 days before the ex-dividend date. When counting the number of days you held the stock, you can’t count certain days during which your risk of loss was diminished. See Pub. 550 for more details. Preferred dividends attributable to periods totaling less than 367 days are subject to the 61-day holding period rule just described.

Dividends on any share of stock to the extent that you are under an obligation (including a short sale) to make related payments with respect to positions in substantially similar or related property.

Payments in lieu of dividends, but only if you know or have reason to know that the payments aren’t qualified dividends.

Dividends from a corporation that first became a surrogate foreign corporation after December 22, 2017, other than a foreign corporation that is treated as a domestic corporation under section 7874(b).

Example 1.

You bought 5,000 shares of XYZ Corp. common stock on July 8. XYZ Corp. paid a cash dividend of 10 cents per share. The ex-dividend date was July 16. Your Form 1099-DIV from XYZ Corp. shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). However, you sold the 5,000 shares on August 11. You held your shares of XYZ Corp. for only 34 days of the 121-day period (from July 9 through August 11). The 121-day period began on May 17 (60 days before the ex-dividend date) and ended on September 14. You have no qualified dividends from XYZ Corp. because you held the XYZ stock for less than 61 days.

Example 2.

The facts are the same as in Example 1 except that you bought the stock on July 15 (the day before the ex-dividend date), and you sold the stock on September 16. You held the stock for 63 days (from July 16 through September 16). The $500 of qualified dividends shown in box 1b of Form 1099-DIV are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 16 through September 14).

Example 3.

You bought 10,000 shares of ABC Mutual Fund common stock on July 8. ABC Mutual Fund paid a cash dividend of 10 cents a share. The ex-dividend date was July 16. The ABC Mutual Fund advises you that the part of the dividend eligible to be treated as qualified dividends equals 2 cents a share. Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. However, you sold the 10,000 shares on August 11. You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days.

Use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, whichever applies, to figure your tax. See the instructions for line 16 for details.