The core difference: tax rate and holding period
may have access to dividends are taxed at the long-term capital gains rate, which is lower than ordinary income tax rates. Ordinary dividends are taxed as regular income at your marginal tax bracket rate. The difference in what you owe can be substantial — may have access to dividends may be taxed at 0%, 15%, or 20% depending on your income, while ordinary dividends are taxed at rates ranging from 10% to 37%.
To receive the lower tax rate on may have access to dividends, you must meet two conditions: the company paying the dividend must be a U.S. corporation or a foreign corporation whose stock trades on a U.S. exchange, and you must have held the stock for more than 60 days during the 121-day window surrounding the ex-dividend date. If you sell the stock too soon or buy it too close to the dividend payment date, the dividend becomes ordinary income instead.
Most dividends from stocks you hold in a regular brokerage account are may have access to if you meet the holding period. Dividends from mutual funds, exchange-traded funds (ETFs), and real estate investment trusts (REITs) can be may have access to or ordinary depending on what those funds hold and how long you have owned them.
Key Takeaways
- may have access to dividends are taxed at capital gains rates (0%, 15%, or 20%), while ordinary dividends are taxed as regular income at your full marginal rate (10% to 37%).
- You must hold the stock for more than 60 days within a 121-day window centered on the ex-dividend date to may have access to for the lower rate.
- Dividends from U.S. stocks and foreign stocks traded on U.S. exchanges can be may have access to; dividends from bonds, money market funds, and some other investments are always ordinary.
- Your brokerage or mutual fund company reports which dividends are may have access to on your Form 1099-DIV, so you do not have to calculate it yourself.
Which investments pay may have access to versus ordinary dividends
Stock dividends from U.S. corporations and foreign corporations whose shares trade on U.S. exchanges can be may have access to if you meet the holding period. This includes most blue-chip stocks, growth stocks, and dividend-paying stocks in your brokerage account.
Ordinary dividends come from bonds, Treasury securities, money market funds, savings accounts, certificates of deposit (CDs), and preferred stock held for less than 60 days. Dividends from real estate investment trusts (REITs) are almost always ordinary income, even if you have held them for years. Dividends from master limited partnerships (MLPs) are also ordinary. Mutual funds and ETFs pass through the character of their underlying dividends — if the fund holds mostly stocks, many dividends will be may have access to; if it holds bonds or REITs, most will be ordinary.
Some companies pay special one-time dividends that are treated as ordinary income regardless of holding period. Your brokerage statement or the Form 1099-DIV you receive in January will specify which dividends are may have access to and which are ordinary.
How the 60-day holding period rule works
The holding period is not simply "own the stock for 60 days." The Internal Revenue Service (IRS) counts 60 days within a specific 121-day window: 60 days before the ex-dividend date through 60 days after it. The ex-dividend date is the cutoff — if you buy on or after that date, you do not receive the dividend at all.
If you buy a stock 10 days before the ex-dividend date and sell it 20 days after, you have held it for 30 days total, which is less than the 60 required. The dividend becomes ordinary income. If you buy 70 days before the ex-dividend date and hold for 70 days after, you meet the requirement and the dividend is may have access to.
The rule exists to prevent investors from buying a stock purely to capture the dividend and then selling immediately. If you hold the stock for a short time around the dividend date, the IRS treats the dividend as ordinary income to discourage that strategy.
Tax brackets and what you actually pay
The tax rate on may have access to dividends depends on your total taxable income for the year, not on the dividend amount alone. For 2024, the 0% rate applies to single filers with taxable income up to $47,025 and married filers filing jointly up to $94,050. The 15% rate applies to income above those thresholds up to $518,900 (single) or $583,750 (married filing jointly). Income above those amounts is taxed at 20%.
Ordinary dividends are taxed at your marginal tax bracket, which ranges from 10% to 37% depending on your total income. If you are in the 24% tax bracket, an ordinary dividend is taxed at 24%, but a may have access to dividend in the same year might be taxed at 15% or 0%. The difference compounds if you receive dividends regularly.
These income thresholds change each year for inflation. Check the IRS website or your tax software for the current year's rates before you file.
What your brokerage reports and how to use it
Your brokerage or mutual fund company sends you a Form 1099-DIV in January showing all dividends paid in the previous year. Box 1a lists ordinary dividends; Box 1b lists may have access to dividends. You do not calculate which is which — the company does that based on the holding period and the type of investment.
When you file your tax return, you report may have access to dividends on Schedule B (Interest and Ordinary Dividends) and then transfer them to the may have access to Dividends and Capital Gain Tax Worksheet or Schedule D, depending on your tax software. Ordinary dividends go on line 5b of Schedule 1 (Additional Income). Your tax software usually handles this automatically if you enter the 1099-DIV information correctly.
If you think your brokerage made an error — for example, if it marked a dividend as ordinary when you held the stock for more than 60 days — contact the company's tax department. They can issue a corrected 1099-DIV before the filing deadline.
How selling stock affects dividend treatment
If you sell a stock before the 60-day holding period ends, the dividend is ordinary income even if the company paid it after you sold. The IRS looks at when you held the stock, not when you received the payment. Selling within 60 days of the ex-dividend date disqualifies the dividend retroactively.
This matters most for investors who buy dividend stocks and then sell them quickly. If you buy a stock on day 40 before the ex-dividend date, receive the dividend, and sell on day 30 after the ex-dividend date, you have held it for only 70 days total — more than 60, so the dividend is may have access to. But if you sell on day 20 after the ex-dividend date, you have held it for only 60 days, which does not meet the "more than 60" requirement, and the dividend becomes ordinary.
Wash-sale rules do not affect dividend qualification, but they do affect capital losses. If you sell a stock at a loss and buy it back within 30 days, the loss is disallowed. This is separate from the dividend holding period rule.
Frequently Asked Questions
Can I get the may have access to dividend rate on dividends from a foreign stock I own?
Yes, if the stock is traded on a U.S. exchange and you meet the 60-day holding period. Dividends from foreign stocks traded only on foreign exchanges are ordinary income. Your brokerage statement will show which dividends may have access to.
What happens if I own a stock through a 401(k) or IRA?
Dividends inside retirement accounts are not taxed at all in the year you receive them. The may have access to versus ordinary distinction does not apply because the account is tax-deferred. You pay tax only when you withdraw money from the account in retirement.
If I inherit stock, do I get the may have access to dividend rate?
No, not automatically. You must hold the inherited stock for more than 60 days after you inherit it to receive may have access to dividend treatment. The holding period resets when you become the owner.
Are stock splits or dividend reinvestment plans treated differently?
No. If you reinvest dividends automatically through a dividend reinvestment plan (DRIP), the reinvested amount is still treated as a dividend payment, and the holding period for the new shares starts from the reinvestment date. Stock splits do not affect the holding period for the original shares.
What if a company I own stops paying dividends and then starts again?
Each dividend payment is evaluated separately. If you hold the stock through multiple dividend payments, each one is may have access to or ordinary based on whether you met the 60-day holding period for that specific payment date.