Finance Maxxing
Capital Gains & Investments
Qualified Dividends
Dividends taxed at LTCG rates instead of ordinary rates.
Qualified dividends are taxed at the preferential long-term capital gains rates (0%, 15%, 20%) instead of ordinary income rates.
Qualification Requirements
- Paid by a U.S. corporation or qualifying foreign corporation
- You held the stock for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date
What's NOT Qualified
| Type | Tax Treatment |
|---|---|
| REIT dividends | Ordinary income (up to 37%) |
| Money market fund dividends | Ordinary income |
| Short-term holding period | Ordinary income |
| Dividends on stock lent (in lieu of) | Ordinary income |
Tax Impact
For a high earner receiving $10,000 in dividends:
| Qualified | Non-Qualified | |
|---|---|---|
| Federal rate | 20% | 37% |
| NIIT | 3.8% | 3.8% |
| Federal tax | $2,380 | $4,080 |
| Savings | — | $1,700 |
Sources
More in Capital Gains & Investments
Long-Term Capital Gains (LTCG)
Gains on assets held over one year, taxed at preferential rates.
Short-Term Capital Gains (STCG)
Gains on assets held one year or less, taxed as ordinary income.
Holding Period
How long you held an asset — determines LTCG vs. STCG.
Net Investment Income Tax (NIIT)
3.8% surtax on investment income for high earners.
Cost Basis
Original purchase price used to calculate gain or loss.
Capital Loss Deduction
Losses offset gains; up to $3,000/yr against ordinary income.
Tax-Loss Harvesting
Selling investments at a loss to offset gains.
Wash Sale Rule
Disallows loss if you repurchase same security within 30 days.
Stepped-Up Basis
Inherited assets reset cost basis to date-of-death value.