Qualified Dividends

You may see notes in the dividend section of your 1099 that describe some of your dividends as "Qualified".

What is that?

It's a good thing. They qualify for a reduced tax rate. For most people, they are taxed at lower long-term capital gains rates rather than at ordinary income rates.

Requirements

There are certain requirements for a dividend to be classified as "Qualified".

Only US and certain foreign companies can issue Qualified Dividends.
Only certain types of dividends are qualified. Dividends from Money Market Accounts are usually not. Neither are dividends from REIT's.
Holding period-You need to have owned the stock paying the dividend for more than 60 days during the 121 days that begin 60 days before the ex-dividend date.

Ex-Dividend Dates

What is an ex-dividend date?

When a dividend is declared by a company they also specify that it will be paid to owners of record as of a certain date. The stock exchanges determine who these are by establishing an "ex-dividend" date. It's usually 2 business days before the record date. If you buy and own a stock before the ex-dividend date, you get the dividend. If you buy it on or after that date, you don't.

bivio Vs Broker

bivio runs the holding period check based on the information entered on the ex-dividend page when you prepare your taxes. Qualified status is determined by comparing those dates and the purchase and sell information in your club records.

It's important to understand that brokers don't have to run this check. All they have to do is tell you if a dividend is paid by a "Qualifying"company. You may find that this will mean the amount of qualified dividends reported by bivio is different from what your broker shows. If you see differences, make sure you know why. But if there is a good explanation it is OK. No matter what the broker reports, you still have the ultimate responsibility to report your taxes correctly.

Dividend Status During the Year

The qualified/non-qualified status of dividends does not matter until you prepare your taxes. So if you see dividends classified as "Ordinary" during the year, it is not something you need to change. Unless they are not classified correctly when you run the tax program, you do not have a problem.

IRS Information

You can find out more information about qualified dividends in this IRS document: Qualified Dividends