Calamos Tax Center
All or a portion of your ordinary income dividend from a fund may be taxed at a lower rate of 15% (or 5% for shareholders in the 15% or lower tax bracket) rather than the higher marginal rates applicable to ordinary income.
Qualified dividends are generally defined as distributions from domestic corporations and certain qualified foreign corporations. A portion of a fund's dividend may not qualify for the lower tax rates, if it is derived from non-qualified sources, such as interest income and short-term gains. Please note that this provision from the Jobs and Growth Tax Relief Reconciliation Act of 2003 is set to expire for taxable years beginning January 1, 2009, and later. Upon expiration of this provision, the tax rate for all dividend income will increase to the higher marginal rates applicable to ordinary income.
The amount of your dividend that is eligible for the lower tax rates is reported in Box 1b of your Form 1099-DIV mailed in January 2009. To be eligible for the lower tax rates, you must have held your shares for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date of the fund.The ex-date is the date on which the dividend is deducted from the fund's per-share net asset value. Shareholders may not count the day on which the shares were purchased or acquired by reinvesting dividends. The day shares are sold may be counted.
Example
An investor has 1,000 shares in a fund which distributes a dividend of 10 cents a share, or a total of $100 for the shareholder. The qualified dividend is determined to be $80, or 80%, and the ex-dividend date is June 20. The investor may report the full $80 as qualified income only if all the shares were owned for 61 days during the window as explained above. In this case, the 61 days must be between April 21 and August 19.
Please note that annual totals and percentages are also listed below as a convenience. However, the annual qualified dividend income percentages will only apply to those shareholders who hold a constant number of shares throughout the calendar year. Please consult your tax advisor.