No. of Recommendations: 2
In addition to the preceding reply

When you say "for income", I assume then that you are taking these preferred stock dividends as required household income as they are produced. If so, then any preferred stock held in a Traditional IRA will produce dividends that will be treated as ordinary income, regardless of the stock's holding period. If held in a taxable account and the preferred stock is issued by a business development company or REIT, most to all of the dividend will be ordinary income. If the preferred stock is really Exchange Traded Debt (they look very similar) or a trust preferred (issued by a bank), then its dividends will be ordinary income. But if issued by a C-Corporation, such as a Utility, Insurance company or bank, the dividend will be qualifying, meaning that if you've met the stock holding period (as described previously), then it will be a tax favored qualified dividend, taxed the same as net long term capital gains.

Another factor with the recent tax law change is REIT dividends, common and preferred, when held in a taxable account, are eligible for the Sec. 199A 20% deduction on the qualifying part of the dividend as shown in Box 5 of the form 1099-DIV. This deduction is not available to those preferred stock held in a tax deferred (IRA or retirement plan) account.

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.