If i set up a mutual fund will my stocks be non-tax deductible?

i just wanted to know

Here's how it works if you buy a mutual fund:

If you buy it inside a retirement plan like an IRA or 401(k), your capital gains and dividends paid into the fund are not taxable. With a Roth IRA, you do not get a deduction off your income taxes. However you can take the principal tax and penalty free for any reason. The earnings are subject to tax and a penalty unless you have an exception. If you wait until 59 1/2 years old, you can take it all out tax free. If you put the money in a Traditional IRA, the contribution IS tax deductible, but you will pay tax when you take the money out (after age 59 1/2). If you take money out prior to 59 1/2 you will owe a 10% penalty (unless you have an exception).

Exceptions include first time home purchase, death, disability, qualifying medical or educational expenses.

If you put the money in a regular investment account, that creates a cost basis. When you sell the shares you will owe capital gains tax on the appreciation (currently 15%). Also, any dividends or capital gain distributions paid by the fund are taxable in the year they are paid.

Confused? Call a mutual fund company like Vanguard or Fidelity with these questions and they will help you.

The capital gains and dividends that you receive from a mutual fund are generally taxable.

Unless you buy a special kind of mutual fund like a "California Tax Exempt Bond Fund" or something simliar, which invests only in bonds which are issued by California and its cities, and is there fore exempt from CA taxes.

Stock sales within a mutual fund are just as taxable to you as if you owned them yourself.

If you own 1% of a mutual fund that, say, sold stock and had a long-term capital gain of $100,000, then your share would be $1,000. At the end of the year, they send you a 1099-B with your share of all gains split out among the categories: capital, interest, dividends (qualified and non-qualified), etc. Your basis in the mutual fund increases each time you have to claim gains.

So, using the previous example, if you paid $10,000 for a mutual fund, and you had to claim $1,000 in capital gains, then your basis is now $11,000. If you sell the fund for $12,500, your gain from the sale would only be $1,500, not $2,500.

Of course, a mutual fund in a tax-deferred account (IRA, 401k) doesn't create a tax event until you eventually take the money out. A mutual fund which owns tax-free things like municipal bonds actually passes out tax-free gains.

The money you put into a mutual fund has already been taxed, so there's no problem there. The money you take out of a mutual fund may not be taxed if it is a municipal bond fund. If it is a stock fund, the money in excess of what you put into the fund is taxed. The money is not tax deductible in any case. What is deductible is any fees you pay to the manager of the fund for managing the fund provided you pay it directly rather than have it taken from your proceeds.

If your funds are retirement accounts, you pay no taxes on the proceeds until you draw money out of the fund.

Good advice is to talk to your financial planner and your tax preparer.

you can set it up either to be a taxable account or a retirement account which is not taxed, it is up to you

a taxable account has no rules or restrictions, you can invest as much as you want each year and take out the money if you want

retirement accounts have more rules and limits on how much you can invest a year, but they delay or avoid taxes

simple as that