You will note that Form 1040 identifies two types of dividends, ordinary and qualified. Why?
Because they are taxed at different tax rates. “Qualified” taxable dividends that are paid by a US domestic company or a qualified foreign company are taxed at either 15% or 20%.
Ordinary dividends are included as taxable income taxed at United States STEP TAX RATES as illustrated below. Details of Dividend income are included on Schedule B, Interest and Ordinary Dividends.
The tax rate on Qualified Dividends is the same as the Long Term Capital Gains rate for investments held more than one year.
Table 1: Tax rates of dividends and LT capital gain for individual taxpayer
| Ordinary Income Tax Rate | Ordinary Dividends | Qualified Dividends and LT Capital Gain |
| 10% | 10% | 0% |
| 15% | 15% | 0% |
| 25% | 25% | 15% |
| 28% | 28% | 15% |
| 33% | 33% | 15% |
| 35% | 35% | 15% |
| 39.6% | 39.6% | 20% |
Table 2: Tax rates of dividends and LT capital gain for trusts and estates
| Taxable Income | Ordinary Dividends | Qualified Dividends and LT Capital Gain |
| Not over $2,500 | 15% | 0% |
| Over $2,500 but not over $5,800 | 25% | 15% |
| Over $5,800 but not over $8,900 | 28% | 15% |
| Over $8,900 but not over $12,150 | 33% | 15% |
| Over $12,150 | 39.6% | 20% |