• Home
  • About Us
    • About Us
    • Meet Our Team
    • Mission Statement
    • Our Promise
    • Our Partners
    • Join Our Team
    • Brokerage Services
  • Our Services
    • Individuals and Families
    • Business Owners
    • Retirees/Medicare Eligible
  • Planning
    • Life Insurance
    • College Planning
    • Retirement Planning
    • Build Wealth
    • Disability Insurance
    • Mortgage Protection
    • Business Valuation
    • Long Term Care
    • Final Expense
    • Home + Auto
  • Business
    • Group Plans
    • Business
    • Key Employees
    • Employee Benefits
    • Executive Carve Out
    • Financial Management
    • Protect Your Business
    • Retirement Planning
    • Succession Planning
  • Resources
    • Careers >
      • Careers
      • Careers Sampling
      • Career Training
      • Internships
      • Producers
      • Join Our Team
    • Articles
    • Market Watch
    • Newsletter
    • FAQs
    • Member Access
  • Contact Us
    • Contact Us
    • Request A Quote
    • Schedule An Appointment
Sunshine Financial Solutions | Insurance, Retirement, College Funding and Business Solutions
  • Home
  • About Us
    • About Us
    • Meet Our Team
    • Mission Statement
    • Our Promise
    • Our Partners
    • Join Our Team
    • Brokerage Services
  • Our Services
    • Individuals and Families
    • Business Owners
    • Retirees/Medicare Eligible
  • Planning
    • Life Insurance
    • College Planning
    • Retirement Planning
    • Build Wealth
    • Disability Insurance
    • Mortgage Protection
    • Business Valuation
    • Long Term Care
    • Final Expense
    • Home + Auto
  • Business
    • Group Plans
    • Business
    • Key Employees
    • Employee Benefits
    • Executive Carve Out
    • Financial Management
    • Protect Your Business
    • Retirement Planning
    • Succession Planning
  • Resources
    • Careers >
      • Careers
      • Careers Sampling
      • Career Training
      • Internships
      • Producers
      • Join Our Team
    • Articles
    • Market Watch
    • Newsletter
    • FAQs
    • Member Access
  • Contact Us
    • Contact Us
    • Request A Quote
    • Schedule An Appointment

Newsletter

How Are Mutual Funds Taxed?

1/3/2019

1 Comment

 
How Are Mutual Funds Taxed?
​
Many people have heard the Benjamin Franklin quote, “In this world nothing is certain but death and taxes.” Mutual fund taxes can be onerous. However, if you understand the complexities of mutual fund taxes and are prepared when tax season comes around, you may be able to lessen the blow.  
DIVIDENDS AND CAPITAL GAINSThe first thing to remember is that you generally must report any mutual fund distributions as income. Even if you reinvest your profits, the federal government still views this as personal income. Your mutual fund will send you a Form 1099-DIV describing what earnings to report on your income tax return. There are two main ways that mutual funds are taxed: dividends and capital gains.
Dividends represent the net earnings of the fund. Qualified dividends, with some exceptions, are dividends received from domestic and foreign corporations after 2002. Foreign dividends must be securities that are traded on U.S. exchanges or have IRS approval.
Capital gains are profits from investor trading or distributions given to shareholders after revenue is taken in from the fund manager’s sales of securities. Provisions in the tax law allow you to pay lower capital gains taxes on the sale of assets held more than one year. These are referred to as “long term” capital gains.
Long-term capital gains and qualified dividends are taxed at 15 percent for single filers whose taxable incomes range from $39,376 up to $434,550, and for married joint filers whose taxable incomes range from $78,751 up to $488,850. Lower-income filers pay zero tax on long-term capital gains and dividends. Higher-income filers whose taxable incomes exceed $434,550 for single filers or $488,850 for joint filers pay 20 percent.  Short-term gains — those resulting from the sale of assets held less than one year — are taxed at your ordinary income tax rate.
Higher-income taxpayers should be aware that they may be subject to an additional 3.8% Medicare unearned income tax on net investment income (unearned income includes dividends) if their adjusted gross income exceeds $200,000 (single filers) or $250,000 (married joint filers). This is an outcome of the Patient Protection and Affordable Care Act of 2010. 
This means that if you’ve been buying shares in a stock or mutual fund over the years and are considering selling part of your holdings, your tax liability could be significantly impacted by the timing of your sale.
TAX-EXEMPT FUNDSOne way to potentially reduce the amount of mutual fund taxes you could pay is by utilizing a tax-exempt bond fund. Distributions from these types of funds are attributable to interest from state and local municipal bonds, so they are exempt from federal income tax (not necessarily state tax). If a bond was issued by a municipality outside the state in which you reside, the interest could be subject to state and local income taxes. Some municipal bond interest could be subject to the federal alternative minimum tax.
Investing in tax-exempt bond funds potentially could lessen the blow of taxes, but it’s important to remember that they may offer lower yields than comparable taxable funds. If you are in a high tax bracket, the tax benefits may make it advantageous for you to invest in lower-yielding tax-exempt funds. Bond funds are subject to the same inflation, interest-rate, and credit risks associated with their underlying bonds. As interest rates rise, bond prices typically fall, which can adversely affect a bond fund's performance. If you sell a tax-exempt bond fund at a profit, you could incur capital gains taxes.
Mutual fund taxes can be cumbersome, but there may be ways to help you potentially pay as little as possible. Remember that there are tax-advantaged accounts that you possibly could utilize, such as IRAs or 401(k)s, to defer taxes until you withdraw funds in retirement. You may want to consider tax-deferred accounts for high-income funds that come with lofty tax rates. Regardless of how you handle your mutual funds, be sure to consult with a tax professional.
The return and principal value of mutual fund shares fluctuate with changes in market conditions. Shares, when redeemed, may be worth more or less than their original cost.
Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the ­purpose of ­avoiding any ­federal tax penalties. You are encouraged to seek advice from an independent professional ­advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the ­purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2019 Broadridge Investor Communication Solutions, Inc.
1 Comment
Emmett Travis link
6/23/2022 05:51:51 am

I really enjoyed your blog posts thank you

Reply



Leave a Reply.

    Archives

    January 2019
    December 2018
    November 2018

    Categories

    All
    College Planning
    Estate Planning
    Retirement
    Risk Management

    RSS Feed

Picture

    Subscribe To Our Newsletter Today!

Submit

Contact Us

Location

1401 N University Dr. Ste 300
​Coral Springs, FL 33071

Phone: 561-609-2251
info@sfsfinancial.org
© 2022 Sunshine Financial Solutions of South Florida, Inc.
Securities offered through OneAmerica Securities, Inc., a Registered Investment Advisor, member FINRA SIPC. Sunshine Financial Solutions of South Florida, Inc. is not an affiliate of OneAmerica Securities or the companies of OneAmerica and is not a broker dealer or Registered Investment Advisor. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individual tax, legal, fiduciary, or investment advice. Neither OneAmerica Securities, the companies of OneAmerica, or Sunshine Financial Solutions of South Florida, Inc. provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor. Guarantees are subject to the claims paying ability of the issuing insurance company.
  • Home
  • About Us
    • About Us
    • Meet Our Team
    • Mission Statement
    • Our Promise
    • Our Partners
    • Join Our Team
    • Brokerage Services
  • Our Services
    • Individuals and Families
    • Business Owners
    • Retirees/Medicare Eligible
  • Planning
    • Life Insurance
    • College Planning
    • Retirement Planning
    • Build Wealth
    • Disability Insurance
    • Mortgage Protection
    • Business Valuation
    • Long Term Care
    • Final Expense
    • Home + Auto
  • Business
    • Group Plans
    • Business
    • Key Employees
    • Employee Benefits
    • Executive Carve Out
    • Financial Management
    • Protect Your Business
    • Retirement Planning
    • Succession Planning
  • Resources
    • Careers >
      • Careers
      • Careers Sampling
      • Career Training
      • Internships
      • Producers
      • Join Our Team
    • Articles
    • Market Watch
    • Newsletter
    • FAQs
    • Member Access
  • Contact Us
    • Contact Us
    • Request A Quote
    • Schedule An Appointment