Dividends
How Dividends Are Taxed in 2026: Qualified vs. Ordinary
Two investors can receive the same dividend and owe very different tax. The difference usually comes down to whether the dividend is qualified, and how long you held the stock.
Not tax advice. Tax rules are detailed and personal. This page explains the general federal rules for 2026; check IRS publications or a tax professional for your situation. State taxes are not covered.
Two kinds of dividends
Your broker reports dividends on Form 1099-DIV. Box 1a shows total ordinary dividends; box 1b shows the part that is qualified. The difference matters:
- Qualified dividends are taxed at the lower long-term capital gains rates: 0%, 15% or 20%.
- Nonqualified (ordinary) dividends are taxed at your regular income tax rate, which can be much higher.
Most dividends from U.S. companies, and from many foreign companies that meet IRS requirements, can be qualified if you meet the holding-period rule. Common examples of dividends that usually aren't qualified include most distributions from REITs and dividends on shares you didn't hold long enough.
The 2026 rates on qualified dividends
For tax year 2026, the IRS set these taxable-income thresholds (Rev. Proc. 2025-32):
| Rate | Single | Married filing jointly |
|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 |
| 20% | Over $545,500 | Over $613,700 |
The thresholds are based on your total taxable income, including the dividends. Head-of-household and married-filing-separately filers have their own thresholds; see the IRS release in the sources.
Example. A single retiree has $38,000 of taxable income, including $6,000 of qualified dividends. Because total taxable income is under $49,450, those qualified dividends are taxed at 0%. The same $6,000 of nonqualified dividends would be taxed at her ordinary income rate.
The holding-period rule
To be qualified, you generally must hold common stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Buy a stock just before the ex-date and sell it soon after, and the dividend is usually taxed as ordinary income. Preferred stock has a longer requirement for some dividends.
The 3.8% net investment income tax
Higher earners may also owe the net investment income tax of 3.8% on dividends and other investment income. It applies when modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly. Those thresholds are set by law and are not adjusted for inflation.
Retirement accounts change the picture
- Traditional IRA and 401(k): no tax when dividends are paid; withdrawals are generally taxed as ordinary income.
- Roth IRA and Roth 401(k): no tax when dividends are paid; qualified withdrawals are generally tax-free.
- Taxable brokerage accounts: dividends are taxed in the year paid, even if reinvested.
That is why some investors hold their highest-yielding, least tax-efficient investments in retirement accounts. Whether that fits you depends on your whole situation.
Reinvested dividends and your cost basis
When dividends are reinvested, each reinvestment buys new shares with their own cost basis. Keep those records (your broker usually does). Forgetting them can lead to paying tax twice: once on the dividend, and again on the same money as a "gain" when you sell.
Free download: Dividend Income TrackerLog holdings, yields, payment dates and income by month. (PDF)
Common questions
What are the 2026 tax rates on qualified dividends?
Qualified dividends are taxed at 0%, 15% or 20%, depending on taxable income. For 2026, the 0% rate applies up to $49,450 of taxable income for single filers and $98,900 for married couples filing jointly; the 20% rate starts above $545,500 single and $613,700 joint.
How long do I have to hold a stock for a dividend to be qualified?
For common stock, generally more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.
Are dividends in an IRA or 401(k) taxed?
Not when they are paid. In a traditional IRA or 401(k), withdrawals are generally taxed as ordinary income later; qualified withdrawals from a Roth account are generally tax-free.