Tax exempt funds?

[fisemper]

I'm looking to put some extra cash into mutual funds that are listed at tax-exempt. Not trying to add to my tax bill. My question is do the dividends get reported to the IRS, maybe as qualified divs?

 

[npage]

I forget how they are coded in the form and I am too lazy to go dig in my file cabinet. I know wherever they are coded and I enter them in turbo tax every year it knows and they do not impact my federal tax. My state does tax them though and turbo tax adjusts this when I enter them.

 

[target2019]

They are coded as tax-exempt.

 

[cathy63]

Tax exempt divs from a mututal fund are reported in box 11 of the 1099-DIV. You put them on line 2a of your 1040.

 

[kaneohe]

Tax exempt divs from a mututal fund are reported in box 11 of the 1099-DIV. You put them on line 2a of your 1040.

I agree............don't be bothered by the terminology........box 11 is called
exempt-interest dividends and box 2a is called tax-exempt interest.

 

[pb4uski]

I'm looking to put some extra cash into mutual funds that are listed at tax-exempt. Not trying to add to my tax bill. My question is do the dividends get reported to the IRS, maybe as qualified divs?

+1 that dividends from tax-free funds will be reported as tax-exempt interest on the 1040.

But you mentioned qualified dividends. Qualified dividends are principally dividends from US stocks or ETF or funds that invest in US stocks. If your taxable income is under $40k/$80k for a single/MFJ couple, qualified dividends are tax free.... add in the standard deduction and that equates to $52.4k/$104.8k of income for a single/MFJ couple.

 

[scrabbler1]

Also keep in mind that if you are in a national tax-exempt bond fund, some of the tax-exempt dividends shown on your federal 1040 form may be taxable on your state income tax return. How much of it is taxable depends on the fund, your state, and how the fund's assets are invested. Usually, there is a chart the investment company puts out early in tax filing season so you will know how much of the tax-exempt income is either taxable or tax-exempt in your state.


For a few years, I had to concern myself with 2 different states because I was filing a state tax return for a state I wasn't living in (a non-resident return), so I needed to use 2 different percentages to get 2 different tax-exempt amounts.

 

[Masquernom]

Vanguard has a nice mutual fund called something like "Tax Managed" fund. The stock portion is managed to not pay many dividends or capital gains, and the bond portion is in federally tax exempt municipal bonds.

 

[fisemper]

Vanguard has a nice mutual fund called something like "Tax Managed" fund. The stock portion is managed to not pay many dividends or capital gains, and the bond portion is in federally tax exempt municipal bonds.

I think I like this option. I'll have to go back and have a look.

 

[Huston55]

I live in California and use VCITX.

 

[retired1]

Here are 2 tax exempt funds I own:

Fidelity® Municipal Bond Index Fund ( FMBIX ) > Exp Ratio: 0.070%
Vanguard Tax-Exempt Bond Index Admiral (VTEAX) > Exp Ratio: 0.090%

 

[jazz4cash]

Ha. I thought you must’ve typo’d those ERs you posted because my Fido single state muni’s ER is 0.55% with comparable performance. I think I may swap it out for your fund. Thanks.