If you own mutual funds that are not in a tax-free account, filling out 1040 can seem daunting. Sometimes there is an intimidating array of rules and calculations on the forms. As it happens, though, there’s a number of ways to make your mutual funds investing tax-efficient.
Key Takeaways
- Stock funds are taxed at the capital gains tax rate.
- Bond funds are taxed differently, and some are even tax-exempt, such as those that invest in municipal bonds.
- International funds are often taxed (once) at the issuing country’s tax rate. However, you may have to pay taxes twice if the issuing country has no tax treaty with the U.S.
- Putting investments into investment accounts like 401(k)s or IRAs ensures you are maximizing your tax-savings potential.
Stock Funds
There is a difference between the tax liability for a stock and a bond fund. Stock funds, if they trade the component…
