How are ordinary dividends taxed differently from qualified dividends?

Qualified dividends get the favorable long-term capital gains rates of 0%, 15%, or 20%, while ordinary (non-qualified) dividends are taxed at your regular income tax rate, which can be much higher. To be qualified, a dividend must come from a U.S. corporation or a qualified foreign one, and you must hold the stock more than 60 days during the 121-day window around the ex-dividend date. Dividends from REITs, most bond funds, money market funds, and MLPs are generally ordinary. Your 1099-DIV splits the two: box 1a shows total ordinary dividends and box 1b shows the qualified portion. Holding dividend payers in a Roth or traditional retirement account sidesteps the question entirely by deferring or eliminating the tax.