Form 1099-DIV Box Decoder Calculator 2026

Box 1a reports total ordinary dividends — all dividends paid during the year regardless of holding period. Box 1b reports the qualified portion of Box 1a. Qualified dividends are taxed at the lower long-term capital gains rates (0%, 15%, or 20% depending on income) rather than at ordinary income rates (up to 37%). To be qualified, dividends must be paid by a US corporation or qualified foreign corporation, and you must meet the holding period requirement: held the stock more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.

Unrecaptured Section 1250 gain (Box 2b) represents the portion of capital gain from depreciation taken on real property. It is taxed at a maximum federal rate of 25% — higher than the standard 0%/15%/20% long-term capital gains rates, but lower than ordinary income rates. This gain typically arises from REIT distributions when the underlying real estate was sold at a gain exceeding its depreciated basis. You report it on Schedule D and the Unrecaptured Section 1250 Gain Worksheet.

Box 3 represents a non-dividend distribution — a return of part of your original investment (basis). It is NOT taxable income in the year received. Instead, it reduces your cost basis in the stock or fund. When you eventually sell, your lower basis means a higher capital gain. Once your basis reaches zero, additional return-of-capital distributions become taxable as long-term or short-term capital gain depending on your holding period. Track Box 3 amounts carefully each year to maintain accurate basis records.

Box 5 reports Section 199A dividends from REITs (Real Estate Investment Trusts) and certain other pass-through entities. Under IRC §199A, individual taxpayers may deduct up to 20% of qualified REIT dividends. This deduction is taken on Form 8995 or 8995-A and reduces taxable income (not a credit). The deduction is available to taxpayers below certain income thresholds and phases out for high earners. Unlike qualified dividends, REIT dividends in Box 5 are still taxed as ordinary income — the §199A deduction simply reduces the amount subject to tax.

Box 2c reports Section 1202 Qualified Small Business Stock (QSBS) gain. Depending on when the stock was acquired, 50%, 75%, or 100% of this gain may be excluded from federal income tax. Stock acquired after September 27, 2010 qualifies for the 100% exclusion. The stock must be from a C-corporation with gross assets under $50 million at time of issuance, held for more than 5 years. The remaining gain (after exclusion) is taxed at the collectibles rate of 28%. There is an annual gain exclusion limit of $10 million (or 10x the adjusted basis, whichever is greater) per issuer per taxpayer.