Dividends are payments you receive from certain investments, such as corporate stocks and shares in a mutual fund. The term "ordinary dividends” includes both qualified and nonqualified dividends, which are taxed at different rates.
Qualified dividends, such as most of those paid on corporate stocks, are taxed at long term capital gains rates — which are lower than ordinary income tax rates. Nonqualified dividends, however, are taxed at the higher ordinary income tax rates.
In order to treat your dividends as qualified dividends, the IRS requires that you hold your stock investment for more than 60 days during the 121-day period that begins 60 days prior to the ex-dividend date — which is the day after a corporation's board declares a dividend payment to shareholders.