- Regular dividends are generally not eligible for the lower long-term capital gains tax rates that Qualified Dividends receive unless the recipient holds the underlying shares for a specific period of time.
- A common misconception is that the underlying shares must be held for longer than one year in order for any related dividends to be taxed as Qualified Dividends.
- Since Real Estate Investment Trusts (REITs) generally pay no entity-level tax, dividends issued by a REIT are generally not eligible for the reduced rates assigned to Qualified Dividends.
- Mutual fund distributions will only qualify for the reduced tax rate to the degree that the amount is determined to be a Qualified Dividend that’s received by the mutual fund.
With the new 21 percent flat tax rate, along with liberalized asset depreciation and expensing provisions plus a lower tax on repatriated foreign earnings, the landmark Tax Cut and Jobs Act (TCJA) has been a boon to U.S. C corporations since its passage late last year. But, many individual taxpayers and their advisors are still digesting the changes and mulling over their next steps. Below is a primer about the tax treatment of dividends, interest and capital gains in light of the new tax reform landscape.