2017 Estimated end of year Distributions for Mutual Funds - some already published

[SoReady]

On the Vanguard list, just before the Capital Gains Section, what does the column with the heading
"Net
income
available
12/31/2017"

mean?

 

[Amethyst]

I'm pretty sure that's dividends, since the funds that have it (e.g. VTSAX) are ones that declare quarterly divs but rarely CGs.

On the Vanguard list, just before the Capital Gains Section, what does the column with the heading
"Net
income
available
12/31/2017"

mean?

 

[audreyh1]

Well, I just ran my first estimate of full year income for this tax year. Two of my top three equity holdings are active Vanguard funds, and both have sizable capital gains distributions this year. Just enough to push me up one bracket in Medicare MAGI. I had a nice plan but was too close to the next bracket.

Oh well. Robert Burns said it best.
If this holds when I run the numbers late this month, I might do a little rebalancing before year end, and take some of that gain now - and lower the risk of the same thing next year.

Ouch!

I'm trying to take as much this year so that next year's income is lower. DH starts Medicare in 2020, so 2018 income will determine the initial premiums.

My funds are paying quite large capital gains. I'm hoping it doesn't repeat next year. 2015 was high, but 2016 dropped back quite a bit. 2017 is back to 2015 levels - well maybe a smidge above.

 

[audreyh1]

I thought the dividend estimates for Vanguard were to be published 12/8 (today)?

Looks like it - there are some links here: https://investornews.vanguard/upcoming-capital-gains-information/

 

[audreyh1]

On the Vanguard list, just before the Capital Gains Section, what does the column with the heading
"Net
income
available
12/31/2017"

mean?

I think that means the dividends that are going to be paid out by 12/31/17.

 

[Sue J]

On the Vanguard list, just before the Capital Gains Section, what does the column with the heading
"Net
income
available
12/31/2017"

mean?

This is on the last page -

Each fund’s year-end income dividend will include net income for the full calendar year, so the amounts shown above will increase by any net income earned in December.

The estimated QDI percentages represent the portion of total 2017 income dividends expected to qualify for reduced tax rates for 2017.

Someone else can explain exactly what that means!

 

[audreyh1]

QDI might mean qualified dividend income?

 

[mrfeh]

Most of my ex-US equity is in Fidelity's FSGDX fund. I received the year-end distributions yesterday.

 

[audreyh1]

Yes. Fidelity pays most of their cap gains distributions out on Friday's in December. So 12/1, 12/8, 12/15, 12/22 etc.

Yesterday 12/8 was a big one. So is next Friday 12/15.

 

[pb4uski]

One thing to keep in mind is what if you own international funds that you need to increase the dividend amounts included in income on your tax return for estimated foreign taxes paid.

So for example, if a fund had $5,000 of income and paid $600 of taxes and distributes $4,400 in dividends, on your tax return it will show up as $5,000 of dividend income and $600 of foreign taxes paid even though the credit to your account for dividends was only $4,400.

 

[RunningBum]

One thing to keep in mind is what if you own international funds that you need to increase the dividend amounts included in income on your tax return for estimated foreign taxes paid.

So for example, if a fund had $5,000 of income and paid $600 of taxes and distributes $4,400 in dividends, on your tax return it will show up as $5,000 of dividend income and $600 of foreign taxes paid even though the credit to your account for dividends was only $4,400.

So, for estimating purposes, for VG total international for example, the first 3 quarter dividend payments credited to my account do NOT include the foreign tax paid part of the dividend. The 4Q estimate they give does, or does not?

 

[jabbahop]

Thanks.

Good news/bad news for us. The good is that overall dividend returns are higher than last year. The bad is that it is putting us close to the ACA subsidy limit which will mean we might need to owe some @ tax time.

 

[audreyh1]

So, for estimating purposes, for VG total international for example, the first 3 quarter dividend payments credited to my account do NOT include the foreign tax paid part of the dividend. The 4Q estimate they give does, or does not?

Most fund companies don't tell you what the foreign tax paid is until after the end of the year. It is normally NOT included in the dividends reported. Then after the end of the year, your reported dividend increases, and you get the information about the foreign tax that was paid on your behalf.

So you in fact get paid less, but more income is reported on your 1099.

 

[pb4uski]

Exactly. I estimated the 2017 foreign taxes paid based on 2016 foreign taxes paid in relation to 2016 dividends received and then grossed up the dividends included in income for that amount and took a tax credit for that amount.

All this sounds bad, but it isn't in that I expect my foreign tax credit to exceed my taxes on non-qualified dividends so for my international holdings in my taxable account my effective tax rate is negative.

 

[RunningBum]

Most fund companies don't tell you what the foreign tax paid is until after the end of the year. It is normally NOT included in the dividends reported. Then after the end of the year, your reported dividend increases, and you get the information about the foreign tax that was paid on your behalf.

So you in fact get paid less, but more income is reported on your 1099.

I understand that, but I can make a decent estimate based on the rate in previous years on the same fund.

My specific question is, VTIAX has $0.28 for the "Net income available 12/31/2017". Does that include foreign taxes or not?

Exactly. I estimated the 2017 foreign taxes paid based on 2016 foreign taxes paid in relation to 2016 dividends received and then grossed up the dividends included in income for that amount and took a tax credit for that amount.

All this sounds bad, but it isn't in that I expect my foreign tax credit to exceed my taxes on non-qualified dividends so for my international holdings in my taxable account my effective tax rate is negative.

Sure, it nets out, but the foreign tax credit comes after MAGI, and with Roth recharacterizations likely going away, it's more and more important to estimate as accurately as possible. By the time we get the final amounts it's going to be too late to tweak anything.

Again, my question is, are you grossing up all of your foreign fund dividends based on that rate, or just the first 3 quarters?

 

[MichaelB]

My specific question is, VTIAX has $0.28 for the "Net income available 12/31/2017". Does that include foreign taxes or not?

My guess is no. Like the first 3 quarterly dividends, this is probably the cash you will receive, and the foreign tax will be grossed up when they prepare the 1099. If you need certainty, I'd call Vanguard.

 

[RunningBum]

btw I tried to look for last year's estimations from VG vs. actual to answer this for myself based on 2016, but I can't find those estimates anywhere. I think VG removes estimates from view once actuals come out to avoid confusion.

 

[RunningBum]

My guess is no. Like the first 3 quarterly dividends, this is probably the cash you will receive, and the foreign tax will be grossed up when they prepare the 1099. If you need certainty, I'd call Vanguard.

Thanks. I'd lean towards that too, since it says "Net", but since pb4 apparently has been doing this (very helpful tip, btw), I was hoping he'd have more certainty about the Q4 estimates.

 

[scrabbler1]

Yes. Fidelity pays most of their cap gains distributions out on Friday's in December. So 12/1, 12/8, 12/15, 12/22 etc.
Yesterday 12/8 was a big one. So is next Friday 12/15.

Actually, because of the Christmas and New Years holidays, after Friday 12/15, non-monthly (dividend) funds going Ex-dividend will do so on 12/26 or 12/28, paying out the next day. Nothing is going on 12/22.

 

[pb4uski]

I think the declarations are all net of tax. FWIW I took what I received YTD and added a Dec dividend of 28c a share to get what I expect to receive for the year, then divided that result by 2016 1099 div/2016 div received to get an estimate of what will be on my 2017 1099.

 

[RunningBum]

I think the declarations are all net of tax. FWIW I took what I received YTD and added a Dec dividend of 28c a share to get what I expect to receive for the year, then divided that result by 2016 1099 div/2016 div received to get an estimate of what will be on my 2017 1099.

Thanks. It's important but not critical for this year, but for next year it will be so I'm going to pay close attention to how it works this year.

 

[pb4uski]

This whole gross-up thing has surprised me in the past, but given that I had the ability to recharacterize as much as I wanted it was no big deal. Looks like that's changing.

 

[Helen]

Doh! I totally forgot about this and bought $100k of Wellseley on Friday...

 

[audreyh1]

I understand that, but I can make a decent estimate based on the rate in previous years on the same fund.

I think that's the best you can do. Add the previous year's foreign tax credit to this year's distributions. Or calculate based on the rate. I believe that foreign tax is only paid on dividends?

 

[pb4uski]

Doh! I totally forgot about this and bought $100k of Wellseley on Friday...

Ouch... can you sell it on Monday and then wait until it goes ex-dividend?