Other pages in this guide deal with specific types of mutual fund dividends. Here is some additional general information about these dividends. Reinvested dividends Most mutual funds allow you to reinvest your dividends, and many investors choose to do so. When you have your dividends reinvested you’re treated the same as if you received the …
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Mutual funds sometimes make distributions that don’t represent earnings. When you receive this type of distribution, you’re considered to be getting back some of the money you invested in the company. That’s why these payments are sometimes called return of capital distributions. The IRS used to call them nontaxable distributions but now calls them nondividend …
Some mutual funds are established to provide a way to invest in municipal bonds and other securities that produce tax-exempt interest. These investments are typically found in taxable accounts of high-income taxpayers. Distributions from these mutual funds are usually composed mainly of tax-exempt interest. Under the special tax rules for mutual funds, you should treat …
If a mutual fund has long-term capital gains, it can designate part of its dividend as a capital gain distribution. The shareholders report this part of the dividend as if it were their own long-term capital gain. These amounts are called capital gain distributions or capital gain dividends. This treatment applies only to long-term capital …
As the term is used in income tax reporting, ordinary dividends include all taxable distributions that aren’t treated as long-term capital gain. That means the number appearing in the box with this label on Form 1099-DIV can include some items that are not exactly ordinary. Qualified dividends Ever since 2003, some or all of your …
The tax law provides a variety of vehicles for retirement savings, including: • IRAs (regular IRAs, Roth IRAs, SEP IRAs) • 401k and 403b plans • Plans such as SEPs and SIMPLEs designed for small businesses Any of these plans can be set up to permit investments in mutual funds. (If the plan is set up by an …
Within a retirement account or other tax-favored investment vehicle, such as a 529 plan, mutual funds generally produce no special tax results. It’s a different story if you own mutual fund shares in a normal, taxable account. In this case, you may encounter a number of special rules that apply to dividends and other distributions. …
Updated November 12, 2023 Perhaps you’re already familiar with the Roth IRA and want to know how Roth accounts in employer plans, known as designated Roth accounts, stack up. Here’s a rundown of the major differences. No income limitation The Roth IRA isn’t available to taxpayers with income above certain levels. For 2024, the contribution …
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