IRS code defines qualified dividends as ordinary dividends that meet certain metrics allowing them to be taxed at lower long-term capital gains rates rather than the higher tax rates reserved for a taxpayer's ordinary income.

Qualified dividends are also taxed at capital gains rates.  To be “qualified” dividends, the dividends must generally be from a domestic corporation or a “qualified foreign corporation,” and the taxpayer must have owned the stock for 60 days during the 121-day period beginning 60 days before the ex-dividend date (in the case of preferred stock, 90 days during the 181-day period beginning 90 days before the ex-dividend date).