Investment Tax Question

There is nothing that makes me feel like more of an idiot than trying to do my taxes

I acknowledge that you are not my accountant, just trying to understand this

Some mutual funds are reporting capital gains distributions. Is this 100% taxable or are you supposed to figure out some sort of cost basis? It seems like, yes, it’s 100% taxable but I certainly don’t want to pay more than I actually owe.

Thanks!

You report capital gains on schedule 1, line 13. If the capital gains are only from mutual funds, check the box. If the amount of capital gains is high enough, you need to file schedule D. Check the rules for needing to use schedule D.

The capital gains should be taxed at 15% or 20%, depending on your income. There is a tax calculation in the 1040 instructions that walk you through it. It compares treating the capital gains separately, or just lumping into the rest of your income.

I am not an accountant.

You mention cost basis. Cost basis comes into play if you sell shares of your mutual fund, but that’s not what is happening when they tell you about capital gains. The mutual fund itself is buying and selling securities all the time, and sometimes sales result in a gain. They have already taken into account what the cost basis was they they paid, and the gain is their profit on the sale. For that, the fund reports capital gains to you and you report that as described by mcgato.

If you sell shares of the mutual fund, you will need to know what you paid for them (cost basis) to be able to calculate and report capital gains on your sale. That is not what your question is about though.

Thank you, that’s essentially what I assumed but your post made it very clear. Appreciated!