Question 1

What is the difference between qualified and ordinary dividends?

Accepted Answer

Qualified dividends are taxed at preferential long-term capital gains rates (0%, 15%, or 20%), while ordinary (non-qualified) dividends are taxed as ordinary income at your marginal rate. To be qualified, dividends must be paid by a U.S. corporation or qualified foreign corporation, and you must meet the holding period requirement (held the stock for more than 60 days during the 121-day period around the ex-dividend date).

Question 2

How are qualified dividends taxed?

Accepted Answer

Qualified dividends are taxed at the same preferential rates as long-term capital gains: 0% if your taxable income is below $48,350 (single) or $96,700 (MFJ), 15% up to $533,400/$600,050, and 20% above those thresholds for 2025.

Question 3

Do dividends count toward the Net Investment Income Tax?

Accepted Answer

Yes. Both qualified and ordinary dividends are included in net investment income for the 3.8% NIIT. The NIIT applies when your MAGI exceeds $200,000 (single) or $250,000 (married filing jointly).

Question 4

Are REIT dividends qualified?

Accepted Answer

Most REIT dividends are not qualified — they are typically taxed as ordinary income. However, REIT dividends may be eligible for the 20% QBI deduction (Section 199A), which can reduce the effective tax rate on REIT income.

Category	Income	Tax	Eff. Rate
Qualified Dividends	$10,000	$1,500	15.00%
Ordinary Dividends	$5,000	$1,100	22.00%
Total	$15,000	$2,600	17.33%

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