Question

What is the federal tax treatment of ordinary dividends?

Ordinary dividends are taxed:
As a capital gain distribution.
As long-term capital gains.
As ordinary income.
The same as qualified dividends.

Answer 1

Ordinary dividends are taxed **as ordinary income**. Unlike qualified dividends, which are taxed at the more favorable long-term capital gains rates, ordinary dividends are subject to the taxpayer's regular income tax rates.