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IRS Form 1040 instructions say that "qualified dividends" have a lower tax rate than ordinary. Yet they are included in the ordinary and added to everything else for the ordinary rates.

What am I missing?

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  • All qualified dividends are ordinary dividends. However, not all ordinary dividends are qualified dividends.
    – Bob
    Commented Sep 16 at 4:33

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Line 3b includes all dividends, so the instructions for Form 1040, Line 3a (qualified dividends) say to,

Use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, whichever applies, to figure your tax. See the instructions for line 16 for details.

It's similar for Line 7 (capital gain/loss) as well. The total amount of gains/loss shows up on Line 7, but the tax worksheets determine what falls under long-term vs. short-term rates.

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