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Dividends and Capital gain Questions
Old 01-26-2008, 11:56 AM   #1
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Dividends and Capital gain Questions

I'm receiving my annual tax forms and one in particular (1099DIV) has me confused when I try to add up what little I made this year.
Can anyone tell me what the difference is between an ordinary dividend and a qualified dividend? And while we're at it the difference between a Long Term capital gain and a Short Term capital gain?
Does the one figure come out of the other figure or are they two separate figures that add together for a total?

I really don't want to be one of those TAX people anytime soon.....I just want to better understand these terms.

Thanks
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Old 01-26-2008, 12:12 PM   #2
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A qualified dividend is one that is eligible for the lower 15% maximum tax rate. An ordinary dividend is taxed as ordinary income.

A Long Term Capital Gain is one in which the asset has been held for at least one year. It is also taxed at a maximum rate of 15%.

Short Term Capital Gains are those on assets held for less than one year. These are taxed at ordinary income rates.

They are entered on specific lines on your 1040 and shedule D.
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Old 01-26-2008, 02:51 PM   #3
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Also.........qualified dividends are usually distributed by common stocks. Non-qualified dividends come from (I think) bonds, preferred stocks, CD's and such. Mutual funds may distribute either or both types of dividends.
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Old 01-26-2008, 03:00 PM   #4
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The ordinary dividend box $$ number includes the amount in the qualified dividend box
so is always greater than or equal to the number in the qualified number box. They go
on the same-named lines on the front page of the 1040 (after appropriate summing).
As already mentioned , the qualified dividends get preferential tax treatment but the difference between two $$ numbers does not

If you buy on Jan 2 and sell on Jan 2 the next yr, it is still a short term capital gain taxed at higher rates than if you sold on Jan 3 (next yr) when it becomes long term and eligible for the lower rates.
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Old 01-26-2008, 03:42 PM   #5
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Quote:
Originally Posted by jazz4cash View Post
Also.........qualified dividends are usually distributed by common stocks. Non-qualified dividends come from (I think) bonds, preferred stocks, CD's and such. Mutual funds may distribute either or both types of dividends.
Preferred stock dividends can be qualified or ordinary. It depends on the specific security.
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Old 01-27-2008, 04:38 AM   #6
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Just as an aside and I guess a plug for Tax Act (but I think the other programs may explain it too). Once you put the numbers in Tax Act where they tell you to for Dividends (Qualified or Ordinary as listed on the 1099-Div) the program will tell you how it actually calculated the taxes and how much you saved in taxes by having the qualified dividends. I think if you are in the 15% bracket you pay only 5% on the qualified dividends and next year I believe it will be 0% for people in the 15% bracket.
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