Tax rates and how they are applied on Stocks are obvious. For short term sell within 1 year, taxed at ordinary income rate of the individual. For long term sell post 1 year, taxed at 10%-20% based on the individual’s highest tax bracket. However, I’m not sure how the following are taxed. Please enlighten! 1. Buying and Selling Mutual/Index Funds 2. Buying and Selling ETFs 3. Periodic Dividends or Interest payments from funds Thanks!!
Location?
Texas
I’m not sure why @bindok asked this as it is not pertinent to OPs question.
Mutual funds are actively managed throughout the year and so the manager would be trading either a short held or long held stocks within the fund isn’t? How are those taxes calculated and how it is shared with the mutual fund holders? If they are spread across, does these get reported or just deducted from the returns reported?
The internal sales of the fund are not individually reported to you. Your taxable event is the sale or purchase of the fund itself. It’s just like how Apple’s purchase of companies and costs are not individually reported to shareholders. Your taxable event is the sale of the fund.
Right on again. Thank you! So when funds report past year earnings, it’s including all tax costs. But other fund expenses will still be excluded from the reported returns and thereby the real return will be lesser, correct?
1,2 same as stocks 3 depends whether qualified dividends or not. Qualified dividends are taxed at long term capitol gains rate non qualified are taxed at income tax rate
Thanks. How to differentiate qualified vs non qualified dividends?
Your brokerage will report this information to you on a Form 1099-B