Stock may prseveral classes of income. The most common are:Dividends - cash paid to you, often quarterly, that represents a share of the companyu2019s profits paid to shareholders.If you have held the underlying stock more than 1 year, these dividends are u201cqualifiedu201d, meaning they are taxes at your cap gains rate. Otherwise, they are taxed at your ordinary income rate (your marginal tax rate).Capital Gains: profits realized when you sell a stock.If you have held a stock less than 1 year before selling, any profit on your sale is taxed as ordinary income (your marginal tax rate).If you have held the stock more than one year, profits are taxed at a special cap gains rate which depends on your marginal tax rate. This is a lower rate than your marginal tax rate (sometimes much lower).Mutual funds may pass their capital gains on to you as Capital Gains Distributions, your collective share of cap gains realized in the fund over the course of the year. These are taxed as capital gains.