Qualified Dividends & Capital Gains — Q&A

Qualified: 15% (most investors) or 20% (two highest brackets). Non-qualified: up to 37% (ordinary income rate). Most dividends are qualified; REITs commonly pay non-qualified.

<20% ownership: exclude 50% of dividends. ≥20% ownership: exclude 65%. Example: $100K KO dividend to GE → tax on $50K (<20%) or $35K (≥20%).

Cost basis = $52 (price + buy commission). Proceeds = $68 (price − sell commission). Capital gain = $16 ($68 − $52).

Held longer than one year — technically one year and one day. Long-term rates: 0%, 15%, or 20%. One year or less = short-term, taxed at ordinary rates up to 37%.

Dividends on 1099-DIV (paid in that calendar year, not declaration year). Capital gains/losses on 1099-B (brokerage proceeds).

FIFO (default): avg basis $21.88, gain $8.12/share. LIFO: $17.97 basis, gain $12.03/share. Specific share ID (highest-cost first): $22.50 basis, gain $7.50/share — most tax-efficient (lowest reported gain).

Progressive: income, estate, gift taxes (higher income → higher %). Regressive: sales tax, excise tax (flat rate regardless of income).

Estates taxed only above $15 million; gifts taxed only above $19,000 (progressive system — less money involved, less/no tax).

2026 — reporting is based on when the dividend is paid, not declared.