What's the difference between qualified and ordinary?

Ordinary dividends are taxed at your regular income rates. Qualified dividends — most U.S. and treaty-country stock held 60+ days — get the 0/15/20% capital-gain rates under §1(h).

Why is 3a smaller than 3b?

Line 3a is the qualified subset of Line 3b. Every qualified dollar is also ordinary income — 3a just flags the part that gets the better rate.

Do reinvested (DRIP) dividends count?

Yes. Reinvested dividends are still dividends in the year paid. The reinvestment raises your basis — you'll thank yourself at sale time.

2025 Form 1040, Lines 3a & 3b

Dividends: Ordinary (3b) vs. Qualified (3a)

By Paul D. Diaz, EA, MBA · Updated September 20, 2026

2025 Form 1040, Lines 3a/3b — ordinary dividends (1099-DIV Box 1a) taxed at your regular rates; qualified dividends (Box 1b) taxed at the 0/15/20% capital-gain rates under IRC §1(h). Same money, two rates — see Guide Ch. 2.

What makes a dividend qualified

Most U.S. corporations and treaty-country stocks qualify if you held the shares 60+ days around the ex-date. REITs, MLPs, money-market payouts, and short holds stay ordinary. Your broker decides per payment — Box 1b is their verdict.

3a is a subset of 3b

Every qualified dollar is also ordinary income, so Line 3b always equals or exceeds 3a. Line 3a just flags the part that flows to the Qualified Dividends Worksheet for the better rate.

From the practice: DRIP reinvestments feel invisible but are fully taxable the year paid — and each reinvestment raises basis. Track it or pay twice. Investment income, at book length →

Questions, answered

What's the difference between qualified and ordinary?: Ordinary dividends are taxed at your regular income rates. Qualified dividends — most U.S. and treaty-country stock held 60+ days — get the 0/15/20% capital-gain rates under §1(h).
Why is 3a smaller than 3b?: Line 3a is the qualified subset of Line 3b. Every qualified dollar is also ordinary income — 3a just flags the part that gets the better rate.
Do reinvested (DRIP) dividends count?: Yes. Reinvested dividends are still dividends in the year paid. The reinvestment raises your basis — you'll thank yourself at sale time.

Keep reading: Taxable Interest (Line 2b) · Total Income (Line 9) · Standard Deduction (Line 12)

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