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08-21-2020, 07:06 AM
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#1
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Recycles dryer sheets
Join Date: Apr 2020
Location: Prattville
Posts: 55
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Tax exempt funds?
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?
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08-21-2020, 08:22 AM
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#2
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Recycles dryer sheets
Join Date: Aug 2020
Posts: 219
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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.
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08-21-2020, 08:28 AM
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#3
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,723
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They are coded as tax-exempt.
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08-21-2020, 08:46 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Location: Coronado
Posts: 3,707
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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.
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08-22-2020, 07:27 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 4,172
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 Quote:
Originally Posted by 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.
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I agree............don't be bothered by the terminology........box 11 is called
exempt-interest dividends and box 2a is called tax-exempt interest.
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08-22-2020, 10:14 AM
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#6
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,375
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Quote:
Originally Posted by 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?
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+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.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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08-22-2020, 07:49 PM
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#7
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Nov 2009
Posts: 6,698
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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.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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08-23-2020, 08:37 AM
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#8
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Full time employment: Posting here.
Join Date: Nov 2008
Location: Louisville
Posts: 601
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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.
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08-24-2020, 06:38 AM
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#9
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Recycles dryer sheets
Join Date: Apr 2020
Location: Prattville
Posts: 55
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Quote:
Originally Posted by 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.
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I think I like this option. I'll have to go back and have a look.
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08-24-2020, 09:44 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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I live in California and use VCITX.
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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08-24-2020, 03:29 PM
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#11
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Recycles dryer sheets
Join Date: Jun 2011
Posts: 297
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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%
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08-25-2020, 10:53 AM
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#12
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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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.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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