What makes a dividend "qualified," and why does that lower my taxes?

Qualified dividends are taxed at the favorable long-term capital gains rates (0%, 15%, or 20%) instead of your higher ordinary income rate. To qualify, the dividend must be paid by a U.S. corporation or a qualified foreign corporation, and you must hold the stock for more than 60 days during the 121-day window around the ex-dividend date. Ordinary (non-qualified) dividends – common from REITs, money market funds, and bond funds – are taxed at your regular rate. Your broker reports the split on Form 1099-DIV: box 1a is total ordinary dividends, box 1b is the qualified portion. The practical takeaway: dividend-paying stocks and broad index funds held long-term usually generate qualified dividends, while REITs and bond income do not, which is one reason REITs are often best held in tax-sheltered accounts.