Each year, a mutual fund is required to pass through essentially all income earned (dividends) and capital gains to shareholders, after the expenses of running the fund are paid. Capital gains distributions are normally paid at the end of a calendar year, whereas income distributions are normally paid on a monthly or quarterly basis.
Distributions of dividends and capital gains are taxed at different rates depending on your tax bracket, and whether the account is taxable or non-taxable. Occasionally, mutual funds may not have any capital gains or income distributions.
Distribution information is provided to you by the mutual fund company on IRS Form 1099.
Jemma Everyday Wisdom: When buying a mutual fund in a taxable account, consider the time of year that you are making your purchase. You may not want to buy shares immediately before a mutual fund declares its distribution as it may have tax implications.
This material has been prepared for informational purposes only. Jemma Financial Services does not provide tax advice. Before taking any action, you should consult a tax professional.
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IMPORTANT NOTICE
You are now leaving the Jemma Investment Advisors, LLC Website and will be entering the Charles Schwab & Co., Inc. ("Schwab") Website. Schwab is a registered broker-dealer, and is not affiliated with Jemma Investment Advisors, LLC, or any advisor(s) whose name(s) appears on this Website. Jemma Investment Advisors, LLC is independently owned and operated. Schwab neither endorses nor recommends Jemma Investment Advisors, LLC. Regardless of any referral or recommendation, Schwab does not endorse or recommend the investment strategy of any advisor. Schwab has agreements with Jemma Investment Advisors, LLC under which Schwab provides Jemma Investment Advisors, LLC with services related to your account. Schwab does not review the Jemma Investment Advisors, LLC Website, and makes no representation regarding the content of the Website. The information contained in the Jemma Investment Advisors, LLC Website should not be considered to be either a recommendation by Schwab or a solicitation of any offer to purchase or sell any securities.
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