Dividends are a share of a company’s profits distributed to its shareholders, providing them with a rewarding incentive for investing in the business. While dividends are generally a source of passive income for investors, not all dividends are treated equally when it comes to taxation. Qualified dividends stand out as a preferred form of investment income due to their favorable tax treatment. Let’s delve into what qualified dividends are and why they are beneficial for investors. Qualified dividends are dividends that meet specific criteria set by the Internal Revenue Service (IRS) of the United States. To be considered qualified, the dividends must originate from either domestic or certain eligible foreign corporations. Additionally, shareholders must meet certain holding period requirements for the respective stocks that pay the dividends. Eligibility Requirements for Qualified Dividends 1. Stock Holding Period To receive the favorable tax treatment of qualified dividends, shareholders must hold the underlying stock for a minimum period. Commonly, the holding period requirement is more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the date after which