To qualify as qualified dividends, how long must shares of common stock be held?

Shares of common stock must be held for at least 60 days during a specified 121-day period that begins 60 days before the ex-dividend date and ends 60 days after that date to qualify for the qualified dividend tax rate. This holding period is important because it helps ensure that the taxpayer has a genuine investment interest in the stock rather than merely holding it to take advantage of favorable tax treatment on dividends.

Qualified dividends are generally taxed at lower capital gains rates rather than ordinary income rates, making this requirement essential for distinguishing between long-term investment and short-term speculation. The specified 121-day period allows for some flexibility in meeting the required holding time. By holding the stock long enough around the ex-dividend date, investors can benefit from reduced tax rates on the dividends received.