Understanding Qualified Dividends: Tax Advantages & Definition

A qualified dividend is one in where capital gains taxes can be applied. Normally, a qualified dividend garners dividends that pass through an investment vehicle. The most basic difference between qualified and ordinary dividends have to do with taxes. Ordinary dividends are taxed at the income tax rate the investor is paying. Qualified dividends, on the other hand, are taxed at a lower capital gains tax rate. Most dividends that are paid out by investment companies and stocks are treated as qualified dividends.