Please explain "qualified" dividend versus "ordinary" dividend. I'm confused.

[LinaJ2018 · Accepted solution]

Ordinary dividends refer to any form of dividends that a shareholder receives from a company as a benefit for holding shares in the firm. They are payments made periodically to shareholders depending on income and profits made by a business in a financial year. As ordinary dividends are treated as ordinary income and not capital gains, they are taxed at the same ordinary income tax rate as your marginal tax rate. 

Qualified dividends fall under a category of ordinary dividends, but meet certain criteria (see below ) that allow them to be taxed at a lower capital gains tax rate, which is currently 0%-15%.  

Criteria:

a. Should be paid by a corporation operating in the US, or by a qualified foreign company; 

b.  The shares should have been held at least 60 days during the 121 day period which starts 60 days prior to the ex-dividend date