Reporting dividents

For dividends to fall in the qualified dividend category, they typically must be paid by a U.S. corporation or a qualifying foreign corporation. Generally, you must also meet the holding period requirement. See this TurboTax tips article for more information.

The holding period for most types of qualified dividends requires you to have held the investment unhedged for more than 60 days during the 121-day period that starts 60 days prior to the ex-dividend date. An ex-dividend date is typically one day before the "date of record" or "record date." If you purchase a dividend-generating investment on its ex-dividend date or after, you typically will not receive the next dividend payment. Generally, the holding period doesn't include the day you purchased an investment, but it does include the day you sold it.

Certain dividend payments aren't qualified dividends even if they're reported as such. These are listed in IRS publication 550 under the "Dividends that are not qualified dividends" section, and they typically include capital gains distributions and dividends you receive from a farmers' cooperative.

Ordinary dividends are the total of all the dividends reported on a 1099-DIV form. Qualified dividends are all or a portion of the total ordinary dividends. They're reported in box 1a on Form 1099-DIV.

While this sounds complicated, your financial institution should specify which dividends are qualified when they report your dividends to you on Form 1099-DIV. Qualified dividends appear in box 1b.