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Do I have to pay capital gains and dividend tax on a Mutual Fund I plan to keep for 5 years? |
I own some shares of a mutual fund. Will I be taxed in the coming years on the capital gains and dividends, even if I reinvest them and do not sell any shares? And in what way will I be taxed? Yes If you invest via an offshore company you have no tax. You will pay tax on any gain if you are lucky enough to have any. If you keep the mutual fund for more than a year, the gain will be taxed as a long term capital gain, which is limited to 15%. If you sell the fund within a year, it will be subject to your ordinary income tax rate. Yes you will. You will pay income tax on the dividends whether you take the money out or reinvest them. And you'll pay capital gains tax on your share of the capital gains of the funds for each year. The amount of capital gains will be added to your basis though, so you won't pay tax again on that amount when you sell the shares. You are taxed every year on dividends and capital gains distributions. The mutual fund will provide Form 1099 with the information. Sale of fund shares does not trigger any additional tax liability. Yes, unless the mutual fund is inside a 401K or IRA. |
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