Only those dividends come under qualified bracket that come
through specific foreign companies or US corporations. Foreign corporations to
offer qualified dividends must come under comprehensive US IT treaty. Another
candidate for qualified dividend is stock paid through the United States
securities market, including NASDAQ. Publication 550 also mentions that in
order for a dividend to come under qualified bracket an investor must hold it
for at least 60 days. In cases where there is a minimum loss of risk, reduction
is possible in this stipulated period.
The qualified dividend category includes distributions on
farmer’s cooperatives, capital gains, tax exempt organization dividends, and
deposit account dividends. Another exception is securities dividends from
employee ownership plans that corporations paying dividends maintain. Qualified
dividends constitute a broad spectrum and an understanding of it is necessary
to ensure that one uses only the appropriate one during tax filing and stay on
the right side of IRS.
2013 Business Tax Extension
2013 Business Tax Extension
Significance of Qualified Dividends:
What is behind the hullabaloo over qualified dividends? Why
are they crucial for a taxpayer? Taxpayers who come within 10%-15% income tax
bracket receive a significant preferential treatment during their tax returns.
This is because capital gain rates for such individuals are 0%. Those within
marginal tax bracket benefit the most from declaring qualified dividends when
filing returns. Those above the 25% margin also get significantly lower rates with
only 15% capital gains taxes. Other forms of income, as bond interests do not
offer such interesting benefits and these come within simple dividends.
Those who consider themselves receiving qualified dividends
should go through IRS publication 550 for gaining a better insight into what
makes up such dividend and how they can use it for tax benefits.
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