Basic Tax Question on LTG/Reinvested Dividends
Thanks in advance for the collective wisdom of the forum.
This is a pretty basic question, but I'm not sure of the answer. We have reached retirement and will need to finally start withdrawing from our nest egg in 2018. I understand and appreciate the pros/cons regarding order of withdrawal from taxable, tax-deferred and Roth funds as discussed in some threads and I-orp. I also understand that all funds withdrawn from tax-deferred accounts are taxed as ordinary income.
But I am unclear as to exactly what is taxed on withdrawals from taxable accounts. Among other taxable assets, we have some long-term taxable MF accounts, with approximately $53,325 in LTGs and approximately $50,650 in reinvested dividends, with a relatively small initial principal investment over many years. Due to the fees on these MFs we will be consuming these accounts first from our taxable funds withdrawals.
I understand that LTGs are taxable (once the taxable threshold for LTGs is met). But I assuming that the taxes due on reinvested dividends were taxed and paid annually when the divs were reinvested, as noted on Line 9a of the 1040. Therefore, I believe those dividends would not be taxed on withdrawal of funds. Is that correct?
Assuming that is correct, how would the withdrawals, taxable LTG vs non-taxable reinvested divs vs original capital investment, be reflected on your return?
Is there a way to reflect withdrawals as a taxable withdrawal of a LTG or a non-taxable withdrawal of either original principal or previously taxed dividend?
Can you instruct the MF to only withdraw LTGs (if your income is low enough) or only withdraw original principal or reinvested divs?