In the United States, a dividend eligible for capital gains tax rather than income tax. This is advantageous to the investor as capital gains are usually taxed at a lower rate than ordinary income. To become a "qualified" dividend, the security from which the dividend derives must be held for at least 61 days during a certain 121-day period (for common stock) or for at least 90 days during a corresponding 181-day period. Also, the corporation paying the dividend must either be American or at least have stock readily tradable in American securities markets. See also: Ordinary dividend.
The dividends that meet Internal Revenue Service regulations for exclusion or partial exclusion from federal income taxation. For example, corporations are permitted to exclude a portion of all of the qualifying dividends received from stock owned in domestic corporations. There are no qualifying dividends for calculating individual income taxes.