Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Bond fund question that I'll ask my accountant, too
Old 02-27-2020, 08:32 PM   #1
Dryer sheet wannabe
 
Join Date: Apr 2019
Location: Denver
Posts: 15
Bond fund question that I'll ask my accountant, too

I had to sell some company stock in a non-retirement account last year. I figured since it was non-retirement (and I'm close to ER) I'd use the proceeds to buy shares of a tax-exempt bond fund, and have that be part of the low-risk part of my AA.

I did that, bought some ABHYX, which pays monthly dividends that are exempt from federal income tax. Nice. HOWEVER, what I didn't think about is state income tax. The fund itself invests in municipal bonds from around the country. Do I have to pay state tax on the dividends? (I think I intended for the dividends to be automatically reinvested, but apparently didn't push the right button when I placed the order). We're not talking huge amounts here, I'm just trying to understand what's what.

Thanks for any help!
__________________

DenverCraig is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-27-2020, 08:42 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 3,526
You will pay state tax on ABHYX, but it’s 4.6% on the distributions. You should be happy with that one. It’s been up nicely during the chaos of the market. Relax, enjoy.
__________________

COcheesehead is offline   Reply With Quote
Old 02-27-2020, 09:50 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 4,836
I presume you will not pay state tax on the portion of the fund invested in your home state’s bonds and the fund will publish a list of the percentage invested per state. I use a home state muni fund that pays ~2.5% apr. so it is “triple tax free” eg Fed, State, local.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 02-27-2020, 10:01 PM   #4
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 4,118
Quote:
Originally Posted by DenverCraig View Post
I had to sell some company stock in a non-retirement account last year. I figured since it was non-retirement (and I'm close to ER) I'd use the proceeds to buy shares of a tax-exempt bond fund, and have that be part of the low-risk part of my AA.

I did that, bought some ABHYX, which pays monthly dividends that are exempt from federal income tax. Nice. HOWEVER, what I didn't think about is state income tax. The fund itself invests in municipal bonds from around the country. Do I have to pay state tax on the dividends? (I think I intended for the dividends to be automatically reinvested, but apparently didn't push the right button when I placed the order). We're not talking huge amounts here, I'm just trying to understand what's what.

Thanks for any help!
As jazz4cash said, you probably won't pay taxes on the portion of your dividends which are sourced from inside your home state. But check your state income tax laws or with a local CPA or EA.

Usually the mutual funds publish the additional tax statement somewhere on their website in January or February each year listing how much is federally sourced and how much is sourced from each state. You basically multiply the applicable percentages by your total income from the fund and put that on the appropriate line(s) of your tax return(s).
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I hope that his isn't too simple a question to ask here Sevo Stock Picking and Market Strategy 7 10-14-2008 02:23 PM
I'm almost too embarassed to ask... azauthor Life after FIRE 1 04-14-2008 04:46 AM
Bond Fund and Money Market Fund Tax Treatment Question terminator FIRE and Money 4 03-01-2007 07:56 AM
Lottery Winner to become Accountant TromboneAl FIRE and Money 30 02-24-2006 04:17 PM
may I ask for advice too? P.S. FIRE and Money 16 03-22-2005 05:28 AM

» Quick Links

 
All times are GMT -6. The time now is 10:35 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×