Qualified dividends
Dividends from US or qualifying foreign corporations, held long enough, that are taxed at the lower capital gain rates.
A qualified dividend gets long-term capital gain rates instead of ordinary income rates. As Topic 404 puts it, they are "taxed at lower capital gain rates."
Here are the 2026 bands from Rev. Proc. 2025-32:
- 0% up to $49,450 of taxable income single, $98,900 joint
- 15% up to $545,500 single, $613,700 joint
- 20% above that
Two tests apply. The payer has to be a US corporation or a qualifying foreign one. And you have to have held the stock long enough. Section 1(h)(11) sets that holding period. The Form 1099-DIV instructions spell it out as more than 60 days during the 121-day period that starts 60 days before the ex-dividend date. If you've owned shares in your own private C corp for years, you pass without thinking about it.
Higher earners can owe the 3.8% net investment income tax on top. C corp dividends are the second layer in double taxation. Money an S corp distributes isn't a dividend in this sense.