Frequently Asked Questions

When do I pay income tax on a regular taxable account?

You pay tax in each of the following cases:
  1. The fund distributes interest or dividend payments. To the holder of the shares on the interest or dividend declaration dates, interest or dividend payments are taxed at regular income tax rates - even if you reinvest such dividends in the fund.
  2. The fund distributes capital gains from the sale of securities, or you sell fund shares at a profit. One of three rates applies to the distribution of capital gains or your sale of fund shares at a profit:
    1. Your regular income tax rate (up to 35%): If the fund held the securities one year or less, or you held the fund shares one year or less, the gains are considered short-term and they are taxed as ordinary income.
    2. Your regular long-term capital gains rate (always lower than your regular rate and currently not more than 15%): If the fund held the securities more than one year, or you held the fund shares more than one year, the gains are taxed as long-term capital gains.
    3. Your qualified 5-year long-term capital gains rate (lower than your regular long-term rate): If you purchased the securities or fund shares after December 31, 2000, and held them longer than 5 years, the gains are taxed as qualified 5-year long-term capital gains.

Investing involves risk including the possible loss of principal. No guarantees of investment success can be offered or that a client's goals and objectives will be achieved. Investments will fluctuate and there will be periods where the investments may be worth less than the initial purchase value.