| Sometimes, an investor may receive less returns | | | | non-qualified dividends, it gets paid out to you the |
| than would have been anticipated. The reason for | | | | investor as unqualified. This means that it will be |
| this is in most cases as a result of taxation of the | | | | subject to tax. To convert it into qualified |
| investment. This is more so with investments like | | | | dividend, the fund must hold the dividend for |
| mutual funds. However, the securities under this | | | | about 61 days for it to be paid out to you as a |
| category tend to be charged much lower tax | | | | qualified dividend. Short-term capital gain is also a |
| than others. Ordinary dividends are the returns | | | | term that disqualifies your dividend from favorable |
| that are more prone to taxation. | | | | tax rates. This means that when a divided has a |
| For your dividends not to be taxed or to be given | | | | short-term capital gain, the income is paid out as |
| a special treatment, they must be included in a | | | | ordinary dividend, which again is subject to tax. |
| category known as 'qualified'. Your dividends may | | | | When trying to determine how much tax your |
| be non-qualified if they include terms like taxable | | | | dividend is subject to, you can make use of some |
| interest. This means that when a mutual fund | | | | simple tips. One, look at the forms 1099-DIV and |
| receives taxable interest, the interest gets paid | | | | form 2439 to see the amount of tax allocated to |
| out as dividends, but at a lower amount because | | | | any amount of the dividend. This is given in |
| of the deducted tax. | | | | percentages. Then look carefully to see whether |
| If your investment also receives some | | | | the income was from interest or from dividends. |