706 / What is qualified dividend income?

Certain dividends are taxed as “net capital gain” for purposes of the reduction in the tax rates on dividends. “Net capital gain” for this purpose means net capital gain increased by “qualified dividend income” (without regard to this paragraph).¹ “Qualified dividend income” means dividends received during the taxable year from domestic corporations and “qualified foreign corporations” (defined below).²

The term qualified dividend income does not include the following:

(1) dividends paid by tax-exempt corporations;

(2) any amount allowed as a deduction under IRC Section 591 (relating to the deduction for dividends paid by mutual savings banks, etc.);