--- title: Can Qualified Dividends Be Used for Opportunity Zones? description: While the Opportunity Zone program was specifically set up to make use of capital gains from the sale of assets, questions have also been asked about what can be invested in Qualified Opportunity Funds (QOFs). Among these queries are whether qualified dividends can be used for opportunity zones. image: https://www.realized1031.com/hubfs/investingiStock-815165952.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Can Qualified Dividends Be Used for Opportunity Zones? Posted Oct 6, 2021 ![investingiStock-815165952](https://www.realized1031.com/hs-fs/hubfs/investingiStock-815165952.jpg?width=750&height=392&name=investingiStock-815165952.jpg) Ever since the Opportunity Zone program came into being, questions have been asked about timelines, approved investment types, and where the federally designated Qualified Opportunity Zones (QOZs) are located. And, while the program was specifically set up to make use of capital gains from the sale of assets, questions have also been asked about what can be invested in Qualified Opportunity Funds (QOFs). Among these queries are whether qualified dividends can be used for opportunity zones. The answer here is an emphatic “no.” Dividends—qualified or ordinary—are not capital gains. And capital gains are the only monies that can be invested in QOFs/QOZs.   ### Defining Dividends A [dividend is defined](https://www.investopedia.com/terms/d/dividend.asp) as a distribution of a corporation’s earnings to shareholders, with the amount and timing determined by the board of directors. Shareholders who own common stock of dividend-paying companies are eligible for dividends, as long as they bought and held the stock before the ex-dividend date. Dividends are a way for companies to thank shareholders for their investments. It’s important to understand that not all corporations pay dividends; instead, many reinvest the profits. If you own stocks or securities that pay dividends, you’ll [receive one of two types](https://www.realized1031.com/glossary/qualified-dividend): **Ordinary dividends** are payments the company makes to you, which are taxed as ordinary income.  **Qualified dividends** are also payments made to you, but these are taxed at the lower capital gains rates, as opposed to ordinary income rates. So, what qualifies as a qualified dividend? Specifically, this type of dividend [needs to meet the following](https://www.investopedia.com/terms/q/qualifieddividend.asp) IRS requirements: 1. **It must be paid by a U.S. company or a qualifying foreign corporation**. A “qualifying” foreign corporation must be incorporated in a U.S. possession, is eligible for the benefits of a comprehensive tax treaty with the U.S., or the stock is traded on U.S. stock exchanges. 2. **It is not considered a non-qualified dividend by the IRS**. In other words, it isn’t paid by real estate investment trusts (REITs), master limited partnerships, money market accounts, or employee stock options.  3. **It must adhere to holding-period qualifications**. Specifically, common stock investors are required to hold their shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date. Holders of preferred stock must hold their shares for more than 90 days for a 181-day period that starts 90 days before the ex-dividend date. The [ex-dividend date](https://seekingalpha.com/article/4439142-what-is-ex-dividend-date) is the drop-dead deadline by which you must buy shares in order to receive a dividend. Specifically, you need to buy those shares the day before the ex-dividend date to qualify for the dividend payment.   ### Dividends versus Capital Gains Now let’s evaluate dividends versus capital gains. The chart below provides a direct comparison of the two.  |   | **Dividends** | **Capital Gains** | | --- | --- | --- | | **What they are** | Income paid out of corporate profits to shareholders | Represents the profit (less expenses) of a sold capital asset | | **How they’re taxed** | Tax rate is based on whether dividends are ordinary or qualified | Tax rate is based on a short-term or long-term hold | | **How they’re paid** | Paid as cash or stock | Paid as cash or equivalent | Boiling this down, dividends have nothing to do with the sale of a capital asset. Rather, it’s paid to you (at the company’s discretion) out of profits. As such, dividends have nothing to do with Opportunity Zone investments. ### Capital Gains Only It bears repeating: Opportunity Zones are [set up to take advantage](https://eig.org/opportunityzones/history) of the trillions of dollars of capital gains. The idea was that those capital gains could be invested in federally designated lower-income areas to help spur economic revitalization. The investments used are profits from the sale of assets, not qualified dividends, which are very different. As always, if you are considering a Qualified Opportunity Fund investment, be sure to talk with your financial planner or tax professional for advice.  There are material risks associated with investing in QOZ properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Costs associated with the transaction may impact investors’ returns, and may outweigh the tax benefits. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice, meeting the particular investment needs of any investor. Download The Guide To Opportunity Zones [![Download The Guidebook to QOZ's](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/QOZ-eBook-250.png?width=250&height=250&name=QOZ-eBook-250.png "Learn More About Qualified ...") ](https://www.realized1031.com/blog/can-qualified-dividends-be-used-for-opportunity-zones#blogform) Download eBook ---   --- ### Download The Guidebook to QOZ's ![Download The Guide To Opportunity Zones](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/QOZ-eBook-550.jpg?width=550&height=650&name=QOZ-eBook-550.jpg) Learn More About Qualified Opportunity Zones Investments. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. 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And, while the program was specifically set up to make use of capital gains from the sale of assets, questions have also been asked about what can be invested in Qualified Opportunity Funds (QOFs). Among these queries are whether qualified dividends can be used for opportunity zones. The answer here is an emphatic “no.” Dividends—qualified or ordinary—are not capital gains. And capital gains are the only monies that can be invested in QOFs/QOZs. Defining Dividends A dividend is defined as a distribution of a corporation’s earnings to shareholders, with the amount and timing determined by the board of directors. Shareholders who own common stock of dividend-paying companies are eligible for dividends, as long as they bought and held the stock before the ex-dividend date. Dividends are a way for companies to thank shareholders for their investments. It’s important to understand that not all corporations pay dividends; instead, many reinvest the profits. If you own stocks or securities that pay dividends, you’ll receive one of two types: Ordinary dividends are payments the company makes to you, which are taxed as ordinary income. Qualified dividends are also payments made to you, but these are taxed at the lower capital gains rates, as opposed to ordinary income rates. So, what qualifies as a qualified dividend? Specifically, this type of dividend needs to meet the following IRS requirements: It must be paid by a U.S. company or a qualifying foreign corporation. A “qualifying” foreign corporation must be incorporated in a U.S. possession, is eligible for the benefits of a comprehensive tax treaty with the U.S., or the stock is traded on U.S. stock exchanges. It is not considered a non-qualified dividend by the IRS. In other words, it isn’t paid by real estate investment trusts (REITs), master limited partnerships, money market accounts, or employee stock options. It must adhere to holding-period qualifications. Specifically, common stock investors are required to hold their shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date. Holders of preferred stock must hold their shares for more than 90 days for a 181-day period that starts 90 days before the ex-dividend date. The ex-dividend date is the drop-dead deadline by which you must buy shares in order to receive a dividend. Specifically, you need to buy those shares the day before the ex-dividend date to qualify for the dividend payment. Dividends versus Capital Gains Now let’s evaluate dividends versus capital gains. The chart below provides a direct comparison of the two. Dividends Capital Gains What they are Income paid out of corporate profits to shareholders Represents the profit (less expenses) of a sold capital asset How they’re taxed Tax rate is based on whether dividends are ordinary or qualified Tax rate is based on a short-term or long-term hold How they’re paid Paid as cash or stock Paid as cash or equivalent Boiling this down, dividends have nothing to do with the sale of a capital asset. Rather, it’s paid to you (at the company’s discretion) out of profits. As such, dividends have nothing to do with Opportunity Zone investments. Capital Gains Only It bears repeating: Opportunity Zones are set up to take advantage of the trillions of dollars of capital gains. The idea was that those capital gains could be invested in federally designated lower-income areas to help spur economic revitalization. The investments used are profits from the sale of assets, not qualified dividends, which are very different. As always, if you are considering a Qualified Opportunity Fund investment, be sure to talk with your financial planner or tax professional for advice. There are material risks associated with investing in QOZ properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Costs associated with the transaction may impact investors’ returns, and may outweigh the tax benefits. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice, meeting the particular investment needs of any investor.", "articleSection" : [ "Qualified Opportunity Zones" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2021-10-07T00:00:01+0000", "datePublished" : "2021-10-07T00:00:01+0000", "description" : "While the Opportunity Zone program was specifically set up to make use of capital gains from the sale of assets, questions have also been asked about what can be invested in Qualified Opportunity Funds (QOFs). Among these queries are whether qualified dividends can be used for opportunity zones.", "headline" : "Can Qualified Dividends Be Used for Opportunity Zones?", "image" : { "@type" : "ImageObject", "height" : 502, "url" : "https://f.hubspotusercontent10.net/hubfs/733513/investingiStock-815165952.jpg", "width" : 750 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/can-qualified-dividends-be-used-for-opportunity-zones", "name" : "Can Qualified Dividends Be Used for Opportunity Zones?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://f.hubspotusercontent10.net/hubfs/733513/investingiStock-815165952.jpg" } ```