Dividend Headaches

The bad news:

Tip:

Under the new tax law, the tax onincome from dividends goes down to15% retroactive to January 1 of thisyear. The rules thatdetermine whether dividend incomequalifies for the lower tax treatmentaren't very simple. One of the more confusingregulations concerns the holdingperiod for dividend-paying stock. Therequirement is that you hold the stockfor more than 60 days during the 120-day period surrounding the ex-dividenddate, which is the date on which a shareno longer carries the right to the mostrecently declared dividend. The USTreasury Department is in the process offiguring out how this rule will apply tomutual fund shareholders. If yourmutual fund shares are in an IRA,401(k), or other tax-deferred account,you don't have to worry; all withdrawalsfrom these accounts are taxedat ordinary income rates.