Qualified Dividends Fully Explained (How To Pay Less Tax On Dividends) |Dividend Income Investing

Qualified Dividends Fully Explained (How To Pay Less Tax On Dividends) |Dividend Income Investing

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I hear dividends even qualified bro!
good morning internets how’s it going so good to see you I got so many comments
and questions regarding qualified dividends how do you get them when do
you not get them all these different questions so I wanted to put this video
together so I can explain how qualified dividends work so you can walk away from
this video with confidence knowing how to achieve that for yourself if you saw
last week’s video of dividends versus wages you could quickly see from a tax
perspective why qualified dividends are badass or they kick some serious ass if
you’re new to investing what dividends are in general is is a share of the
company’s earnings with their shareholders that’s what a dividend is
it’s a payout of the company’s earnings by making your living through qualified
dividends you could actually pay 68% or less in tax compared to actually going
to work and working for a living versus living off investments so it’s really
powerful and I had to really study up on some of this stuff I knew a lot of it
already but there were several aspects of these technicalities is there’s very
technical stuff of how this actually all works the biggest difference between a
qualified dividend and an ordinary dividend is a tax treatment but
basically when when you receive a dividend if it comes in the form of an
ordinary dividend you pay tax on it at your personal marginal tax rates which
I’m gonna display on screen right now as you can see the personal margarit
marginal tax rates they go anywhere from zero all the way up to thirty seven
percent now if you receive that dividend in the form of a qualified dividend you
get a capital gain rate tax treatment instead and not a tap and not a marginal
tax rate capital gain rates are much more favorable for tax purposes and can
save you a lot of tax so for a qualified dividend you’re the tax you’ll pay on
those qualified dividends ranges anywhere from zero to a maximum rate of
20% now what’s not shown on here that is if
your income is in excess of two hundred thousand per year then you also have to
pay net investment income taxes on that on those investment
earnings like dividends until your max rate would be closer to 24% but lo and
behold no matter how what even if you’re at the maximum income tax record level
of 37 percent the most you’ll ever pay in taxes on your qualified dividends
would be around twenty four percent if your income is over two hundred thousand
dollars but let me just share with you real quickly on when you will not
receive qualified dividend treatment and I’ve mentioned some of these before in
our previous videos but one is real estate investment trusts known as REITs
master limited partnerships usually you’re not gonna receive qualified
dividends from those I have the k1 statement on screen but generally
speaking just so you guys know from a qualified dividends perspective you’re
not gonna be able to obtain that by investing in master limited partnerships
employee stock options is another time you won’t receive qualified dividend
treatment tax-exempt companies you won’t receive qualified dividends from them
money market accounts such as like your savings savings account or high yielding
accounts special one-time dividends are not qualified or cannot receive
qualified treatment and if you’re investing in options if you’re doing
placing puts and calls or if you’re selling the market short then you’re not
gonna be able to get qualified treatment there either in my last dividend
investing video somebody asked me they said Mike can my ETFs or mutual funds
can they can those receive qualified dividend treatment the answer is yes and
no so some of them can and some of them cannot to get qualified dividend
treatment as long as you’re not investing in the things we just
mentioned above right here these things right here the only thing you need to do
is just really hold on to the investment and not sell it it’s that simple so
here’s the rules and then we’re gonna look at an example on screen that’s
gonna help break this out the ayah it says the IRS requires investors to hold
shares for a minimum period of time to benefit from lower tax rate on qualified
dividends common stock investors must hold the shares for more than 60 days
during the 121 day period that starts 60 days before the ex-dividend date fudge I
can use play that please when I read that it’s really confusing to help me
understand it I had to visually break it out so the way this all works for a
company when they’re gonna pay out a portion of its earnings as a dividend to
its shareholders is first they declare the dividend and there’s a date and time
when they say okay ladies and gentlemen shareholders we’re gonna we’re gonna be
issuing you a dividend in the future so the first thing declare it then what
they do is they determine a report date and that report date is has a list of
all the shareholders by that date as a shareholder in order to receive that
dividend payment you have to be on their books as a shareholder at that time and
then what they do from their report date they declare an ex dividend date the
ex-dividend date is basically your cutoff date so if the and usually the
ex-dividend date is one day before the report date so x7 date is usually one
day before the report date so basically if you don’t own those shares before
before that ex-dividend date you’re not gonna receive that quarters dividend or
that month’s dividend does that make sense so to make sense of this guys I
actually had to break this out on on Excel to visually show you how this
works so what I did here guys is there’s an example that s investopedia provides
that explains the the cutoff date and all that for qualified dividends and how
long you need to hold them and so let’s just read that real quick here and
that’s what I used I use this information to to build this
but I had to visually lay it out to make sense for me because I when I’m reading
it it wasn’t making sense says an investor receives dividends as qualified
from shares and mutual fund X so they’re using a mutual fund as the example that
investor bought 1000 shares of fund X on May 1st so on May 1st they that was
their purchase date so here’s the purchase date as May 1st that’s when
they went to start to brag to their co-workers and Friends of how they’re
gonna start receiving cash flow and they’re are gonna have passive income
and then soon afterwards their friends start to hate them they said shut up
well you know you’re doing well we know you’re investing I don’t need to hear
about it then you told them about then they went and told them about the fire
movement and about how you’re gonna retire early except when they heard the
fire movement they thought you’re an arsonist so don’t tell people about the
fire moment unless you explain what it is
now in the article the ex-dividend date they lay out is May 15th which is right
here that’s the ex-dividend date so what that
means is that as a shareholder this person would have needed to hold shares
in the company before this date of the ex-dividend date to receive that
dividend so knowing that the ex-dividend date is the 15th of May does this
investor are they going to qualify for the dividend yes and because they
purchase their shares on May 1st which is before are prior to the ex-dividend
date so they’re they’re definitely going to be able to receive that dividend now
the question is is it going is that dividend going to be and come to them in
the form of an ordinary dividend or are they going to get the special tax rate
treatment and get the qualified dividend well in order to get the qualified
dividend they would have to hold that investment for 61 days or because it
says hold for more than 60 days right here and so they would hold that
investment from May 1st all the way through July 1st but at that point by
July 1st now they’ve held it long enough to
receive that dividend in the form of a qualified dividend now in the
investopedia article it didn’t list a dividend payout date there’s that the
ex-dividend date doesn’t mean that’s when the dividend is gonna be paid out
that’s not what it means there is another date of when they’ll
declare when that divin will actually be made now for the example here I’m just
gonna say it’s July 5th that’s when this company’s gonna pay out their dividend
the cash is actually gonna leave the account and go to the shareholders now
we know this investor we know they’re gonna receive the dividend but will they
receive the qualified dividend the answer is yes because they’ve met the
holding period of more than 60 days as of July 1st and the payout didn’t
encourage held July 5th so they’re good so that dividend should come to them in
a form of a qualified dividend to show you a real example of this what I’ve
done is on screen here I hope you guys can see this okay is this page just one
of the pages from my taxable brokerage account this is from the the monthly
statements I get if you look at this statement if you look at this page if
you go about halfway down and you see Clorox it’s a little bit
more than halfway down the page look at Clorox and you’ll see there’s a
qualified divin so the statement itself will tell you if your dividends have
become qualified when they are paid out so in this example I received nine
dollars and sixty cents from Clorox no big no big deal but that dividend is
qualified which means I get the SPECIAL tax rate treatment and I also wanted to
point out see now look below Clorox is EPR properties now that’s a real estate
investment trust now remember real estate investment
trusts are not able to get qualified dividends so you’ll see there it says
ordinary dividends so I received an ordinary dividend from EPR of $26.25
below that is Procter & Gamble which is a company I’ve owned for quite some time
now and you can see those dividends are qualified so that’s what it looks like
on your actual investment statements it’s gonna look something like that and
that’s how you’re gonna be able to tell what type of dividend you’re receiving
going back to our example here to wrap things up is now because the payout date
was July 5th this investor had held this investment long enough to get the
qualified dividend but if the payout date was prior to this date so let’s say
the payout date was June 15th let’s say the payout date occurred here
well that investor would then that same dividend would no longer be a qualified
dividend but would be an ordinary dividend because they didn’t meet the 60
plus they holding period which would not have occurred and chilled shall I first
so that’s the basics of how long you need to hold an investment to receive
qualified dividends now I apologize in last week’s video on dividends versus
wages I somebody asked me Mike how long do I need to hold the investment for it
to be qualified I said six to twelve months well I’m a big dum-dum it’s
nowhere near six to twelve months it’s only greater than sixty days
according to this investopedia article sorry about that I apologize I totally
had that wrong but all you need to do guys is just hold onto these investments
long term especially if your cash flow vest investor and eventually you’re
gonna see they’re in a shift from an ordinary dividend to a qualified
dividend all right everybody I hope that made sense that’s about how long you
need to hold these things and how it works from a technical perspective of
what’s visually happening is you have your purchase dates you have the date
the company declares they’re gonna pay a dividend they then determine a report
dates from the report they determine the ex-dividend date of when you you need to
own the shares before the ex-dividend date in order to qualify for that
dividend and then they determine the date they’re actually gonna pay out the
cash for that dividend later on so there’s all these little dates to keep
track of when you purchase to when they pay it out to when the ex-dividend date
is so it gets quite confusing but if you just hold the investment long enough you
don’t even have to worry about these stuff guys and eventually you’re gonna
get that good tax rate and you’re going to be able to make passive income and
pay less taxes which is freaking sweet all right guys if you enjoyed the video
today please let me know i’m crushing that like button it really helps out the
channel leave your questions your comments down below I love reading
everything you guys have to say if you’re brand new to the channel I just
want to say welcome on money and life TV we’re all about helping you become
fiscally fit we teach finances investing taxes and more on a regular basis on
this channel with that being said it is truly an
honor to have you and thank you for spending time with me on YouTube
interacting with you in the comments section is by far the best part about
doing YouTube so that’s where I’ll see you guys have a great week everybody I
love you all now take this information and use it to live your life on Kage
I’ll see in the next video peace

44 thoughts on “Qualified Dividends Fully Explained (How To Pay Less Tax On Dividends) |Dividend Income Investing”

  1. Hope this info came across ok and it makes sense. Thanks for continuing to make this channel awesome by leaving a like and commenting and Thank you for over 23,000 subs! So blessed to have you all in my life.

  2. 1:20 – Ordinary dividend tax rates

    1:37 – Qualified dividend tax rates

    2:34 – When qualified dividends are not allowed

    3:40 – How to get qualified dividends (Rules for qualified dividends)

    5:30 – Qualified dividend income example

  3. Other important videos in this series

    – Dividends vs wages – https://youtu.be/D2XPIuidAhI

    – How we make roughly $400 per month in dividends – https://youtu.be/DQ4EIN0wNuI

    – How we started from $0 invested to 100's per month – https://youtu.be/NImh7ycLZGw

    Other important videos:

    How To Buy Dividend Stocks: https://youtu.be/isDiBoFxH-g

    Roth IRA Rules Explained: https://youtu.be/3MzZfRrgEYg

    How Rich Can A Roth IRA Make You: https://youtu.be/2nx0vHGNVmE

    To learn the differences between investments accounts follow this link: https://youtu.be/FoWzmJt5M3A

    Our complete investing library can be found here:

    Stock Market Investing: https://goo.gl/hi2kK4

    Dividend Investing Playlist: https://goo.gl/njSrk2

  4. Once again you've crushed it and reinforced my preference to be an income investor. You made it simple and easy to understand the difference between qualified vs ordinary dividends. Motivated me to get me more of those qualifieds.

  5. I’m not paying anything in taxes since it’s all in a Roth IRA and my tax bracket is pretty low with my wife going back to school

  6. Nice, the info you really need to know, as opposed to the info you "THINK" you need to know- ie.. get rich quick in the stock market info. lol @6:14 good times… -Cheers

  7. I wish I watched your vlogs back in 1960, as I would have been much better at keeping our Uncle away from my money…but I didn't have a computer back then

  8. Great Information As Always Brother!!! Best To Buy And Hold !!! 👍🏻👍🏻👍🏻

  9. Thank you for making this video. I'm a new investor and I bought a decent amount of reit. Lol I didn't know they couldn't be qualified dividends.

  10. Steigende Arbeitslosigkeit oder recht Arbeit auf mindeslohn ! viele media sagen andres!

    Soziale verpflichtung Beitragszahlung in sozialversicherungen entledigen zu können, wenn gesellschaftlich Arbeiter leben verbessern! Die sozialversicherungssystem ist eng an die veraussetzung eines gefestigen normalearbeitsverhältnissen! Alle Abhängigen erwerbstätigengeknüpft, weichen die indivdullen lebensläufe, auf grund zu nehmende massen Arbeitslosigkeit, inder dicosion lassen sie sich verschidenen dieverigiernden positionen erkennen wie usa media; * wann demostranten auf dem straßen kamm über ungleichheiten auf verschidenen procese bewerben kamm polisisten mit pfefferspray, gassparay gegen poblikum gegen jeder freiheiten wann immer die rechtumer politig sagt! Was media sagen; * auf einenpfeffersparay( selbsverteiligungsgas) nicht in die eigenen Augen spühren, bedutet neben Augen sprühen! * auf einem vferrierpack ba5tterien; fals errtumlichverschluckt bitte Arzt aufsuchen, warum weill immer an kapitalisten gehört wenn euch verfolgen längere zeit ihre stelle bleiben kann das wegen vergesen zu warheit sagen wer bringe euch mit soziale media gute nachrechten!* Auf harrspray; erstwieder rauchen wenn harrspray getrocknet ist! * Auf eine Antibabtypille; sprechen nicht einnehmen, fals sie schwanger sind, schwanger sein könnten oder schwanger werden wollen! * Auf eine tachenlampe reden; Erhelt die weitere Umgebung, sogar im dunkelen! * Auf Ohrstöpseln sagen, nicht giftig, aber geeignet, die Atmung zu behindern, fals sie in die luftröhre gelangen!* sprechen auf eine 500 teile puzzele muss erst noch zusammengefügt werden!* sprechen auf kinder wagen; kind vor dem zusammenklappen entfernen!* Auf eine mikrowelle sagen nicht geeignet, um Hamester zu trocken was 30 jahre lang täglich mein essen warm mache! Auf einer flache champagner, vor dem Aufwärmen, der mikrowelle Etiket entfernen! * auf einen straßen schild; bei regen gefahr von wasser auf dem straße! * auf einen Auto sonnen blande, sagen , nicht mit herabgezeugener Sonnenblende fahren!* Auf einen Busctabenset für Erstklässler, mit diesem Buschtaben können unanständige Wörter gebildet werden* hinweis Schild an USA Autobahn; Staatgefängnis Missnahme von Anhalten auf eigene gefahr!* Auf einem Hustensaft für kinder nach einnahmen nicht Auto fahren oder schweres gerät bedinen! Und zu weiter sie haben volles verständniss was immer die media sagt; was von Ahnungen haben welche gründen sind verbildet wo vor jeder sprechen was sie wollen, weil jeder haben von Kapitalistensystem politiker Rechtparteien und reichtumer recht bekommen! Sie wiessen nicht wie weit können menschen seele, verstand und meinungsfreiheiten verletzen! Wenn wir übersteigen Arbeitslosigkeit sprechen, hat auch jeder bildungstellen, schule,, erfahrungen und Alte und eigene Bewerbungen Lebenslauf zutun! Viele verträter der Gewerkschaften erscheinen zu minderige Löhne als Ursache der Arbeitslosigkeit, es ist zweifellos, richtig, daß das Lohnniveau zu niedrig ist, um alle die produzieren waren bürge abzutragen! Die mit wachsender energie aufgetraumt werden! In diese Hinsicht ist das loh niveau tatsätslich eine ursachen der Arbeitslosigkeit die falche bildung, die trenungs massnahmen, die vorbreitung Arbeit, die bilige Arbeit, die niedrige lohn und kurz Arbeit alles kann die Arbeiter kraft verletzen, die sicherheit Arbeiter im gefahr bringen! Die Abhängigkeiten zur staat stiegen! Die öffentlich sind die höhe gewinne hinreichende bedinungen Arbeitsplatz schlafende invistionen schließt runter in gewinnen Armut nicht sondren reichtummer alle banken, gesetzu, politische reform media , presse, zeitungen, mobile, und interne versuchen immer die reichtumer verfolgen geld verdinen, genau das wegen sprechen wir alle die jenigen werklich wollen auf menschen seiten sein und für poblikum besere leben sprechen oder Arbeiten sollen nicht mehr für geld Erwarten weiter sein konto voll machen das macht jeder reichtumer soll nicht jeder politker machen! Denken sie an was leben die flüchtlingen 68,5 millionen menschen auf dem flücht leben, viel beser über reichtume4r konto denken! Weiter schulden aufbauen poblikum bezahlen! Ahmad hesam

  11. Thank you for the great video.
    Do the same rules apply if you hold US dividend paying stocks from abroad?

  12. This was a great video and explained alot…i didnt know anything about their being a difference. I def will be recieving qualified dividends n that good tax rate bc i wont be selling for a while.

  13. Hey good video and thanks for the tips I will defiantly use them as i'm starting on my Dividend investing journey!

  14. Hello. I have one question. I have about 10K of emergency funds that must be available to me immediately. But I keep them in a savings account today, which does not protect me from inflation. So, I want to ask you about BONDs. (1) How are the gains on bonds taxed? (2) How can I put my emergency money on bonds? And, if I do, how fast can I access that money in case I need it?

  15. Hey again. The timing of this video was spot on. One thing to note, I checked my tax return and got qualified dividends from my employee stock plan. What is the reasoning that it wouldn't be qualified?

  16. When I read through the requirements it leads me to believe that if you hold it for 61 days DURING the 121 day period then it will be qualified. So if you purchased 2 days before the Ex-Div Date and held onto it for 61 days then it would be qualified when you file your taxes.

    Date Purchased 5/13/2019
    Ex-Div Date 5/15/2019
    Payout Date 7/5/2019
    Holding Period Met if held past 7/14/2019

    Then it would still be qualified even though you had not held it for 61 days before payout.

    Am I missing something???

  17. As a 64 year old, can I open an IRA account and not pay income tax from dividends and interest received?. Thank you and love your videos.

  18. So let's say you have a stock and a handful of stocks that you have owned for well over the qualifying period. You purchase more stock but that stock isn't long enough to qualify in this period and dividends are paid out. Does a portion become quailified or does it all just become common etc?

  19. Hey mike, I would like to hear your thoughts on QBI now that you went through a tax season dealing with it. If you have any tips or tricks you can share!

  20. You made a mistake but put in all the work and figured the right answer. Thanks for sharing. This is really good to know.

  21. Can an LLC do the same setup for qualified dividends? So instead of paying member/members a wage, they are paid a dividend instead (with the same date setup)? Thanks.

  22. Mike, I am using this video as a link from my dividends video, So people will understand the difference between qualified and non qualified dividends since you are way better at explaining them

  23. What is I buy 1 share. Hold it for 121 days. Then buy 599 shares before the ex div date does all 600 count or just the first one?

  24. and I love you, too!!!
    Thank you so much for your channel. My young-adult brain is exploding in size because of your teachings, and it makes me less scared of being a mid-adult! I'm so much more comfortable. You're such a blessing!

  25. Hi Mike, love watching your videos and the information that you provide. I have a question on Master Limited Partnerships? If I buy and hold a Master Limited Partnership in my Roth IRA account will it be taxed at retirement or does it grow tax free just like REITs? Thank you.

  26. Does the consideration for qualified dividend count for EACH STOCK? For example, if I purchased 100 brand new shares of a company then a month later add 10 more stocks, would it be just the 100 shares that count as qualified or all 110 shares because it’s just the brand new company position that I didn’t own before.

    Based on this realization, is this a way of saying to never buy stocks towards the end of the year or early of the year when it’s so close to tax filing deadline in April because those new stocks won’t have ample time to make it past the 60 days minimum to transition from ordinary to qualified dividend?

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