Dividends and Capital Gain Distributions FAQs (2024)

When will I receive my IRS Form 1099-DIV?
Form 1099-DIV will generally mail by January 31. You can access it online through your account.

Note: It is common for funds that invest in Real Estate Investment Trust (REIT) to mail later than January 31. The following funds will mail 1099-B and 1099-DIV tax forms mid- to late February:

  • Thrivent Diversified Income Plus Fund
  • Thrivent Multidimensional Income Fund

Since the above funds invest in REITs, the classification of the distributions made by the REIT holding is not available to the Fund in time to provide the 1099 form by January 31. If the REIT fund receives a reallocation which is due to the classification of the distribution made by the REIT holding, this adjustment is passed on to the shareholder. The 1099-DIV form for these funds may reflect reallocated dividends and capital gains and you may notice the dividend and capital gain amounts reported on the 1099-DIV do not match the dividend and capital gain amounts shown on your year-end statement for these funds. You should use the information provided on the 1099-DIV not the year-end statement.

Why did I receive a Form 1099-DIV?
Federal regulations require companies to report all dividend and capital gain distributions greater than $10 to shareholders and to the IRS on Form 1099-DIV, regardless of when the shareholder reinvested or received dividends in cash. These distributions are taxable in the year received.

Why didn't I receive a Form 1099-DIV?
See information above if you own Thrivent Diversified Income Plus Fund or Thrivent Multidimensional Income Fund.

Shareholders with dividends and short-term capital gain distributions under $10 will not receive a Form 1099-DIV. The IRS does not require 1099 Forms in cases where the interest, dividends or short-term capital gain distributions are under $10. However, the IRS does require individuals to report these amounts under $10 on their tax returns. Shareholders can check their year-end statements to verify the total amount of dividends and capital gains for an account. If you don't know whether to include this amount, please consult your tax advisor.

What is a dividend distribution?
A dividend distribution is income from dividends and interest earned by a mutual fund's holdings. Dividends that a fund earns must be paid to shareholders at least once per year.

What are qualified dividends?
Per the IRS, qualified dividends are ordinary dividends meeting specific criteria so they can be taxed at a lower long-term capital gains tax rate.

When are dividends and capital gains paid?
Thrivent Mutual Funds distribution policy is as follows: money market and most bond funds generally declare income dividends daily and distribute them monthly. Income dividends are often paid quarterly for balanced funds (stocks, bonds, and cash). Capital gains (if required) for equity and bond funds are generally paid after fiscal year-end and before calendar year-end. Thrivent Mutual Funds typically distributes capital gains in December.

How do I determine if I will receive a dividend or capital gain distribution and when I will receive it?
The fund's prospectus indicates the dividend schedule followed. Thrivent Mutual Funds generally distributes capital gain distributions annually in December. The timing of a distribution and the determination of which shareholder is eligible to receive it is based upon the record date. The date the distribution is paid is the ex-dividend date.

  • Record Date: All shareholders who own shares as of the end of this day are eligible to receive the distribution. This date is usually the business day prior to the ex-dividend date.
  • Ex-dividend Date/Payable Date: The date on which the distribution amount per share is deducted from the fund's net asset value per share. The fund pays shareholders their share of the distribution on this date.

Why was federal income tax withheld from my dividends and capital gains?
The IRS requires mutual fund companies to withhold federal income tax at a rate of 24% for one of two reasons:

  • We do not have a certified Social Security number on file for your account.
  • The IRS has instructed us to withhold on your account.

This withholding has been forwarded to the IRS on your behalf as a prepayment of your income taxes. Therefore, we cannot refund to you amounts withheld. Report the amount of tax withheld on your IRS Form 1040.

Which federal tax rates apply to dividends and capital gains?
Nonqualified dividends and short-term capital gains are subject to ordinary income tax rates. Qualified dividends and long-term capital gains are subject to the applicable capital gain rate, depending on your income tax bracket.

Is a return of capital (nontaxable distribution) reported on my IRS Form 1040?
Return of capital distributions are generally not taxed unless the return of capital amount exceeds the cost basis of the mutual fund shares you own. The return of capital distribution reduces your cost basis for the mutual fund shares. If cost basis is available for your account, the applicable adjustments are made for return of capital distributions.

Why are some of the dividends from the Thrivent Municipal Bond Fund and Thrivent High Income Municipal Bond Fund subject to the AMT?
The portion of earnings subject to the Alternative Minimum Tax (AMT) calculation for each fund comes from the Fund’s investment in private activity municipal bonds. See the following percentage of federal tax-exempt dividends that are subject to the AMT.

How are the dividends earned on the Thrivent Municipal Bond Fund and Thrivent High Income Municipal Bond Fund taxed at the state level?
For the most part, all the distributions you received from the Thrivent Municipal Bond Fund and the Thrivent High Income Municipal Bond Fund are taxable at the state level. However, some states do not tax their residents on interest attributed to municipal securities issued by that state. See the State Tax Information for Federal Tax-Exempt Dividends page for more information.

Why aren’t all of the dividends from the Thrivent Municipal Bond Fund and Thrivent High Income Municipal Bond Fund exempt from federal income tax?
Most of the dividends paid by the Thrivent Municipal Bond Fund and the Thrivent High Income Municipal Bond Fund are exempt from federal income tax because the Funds primarily invest in municipal bonds that are tax-exempt. However, a small portion of the dividends paid by the Funds are considered taxable income because some bonds were purchased at a discount to the market. This discount results when the purchase price is lower than the issue price of the bond. The difference is accrued as taxable income for the bond’s life and is not tax-exempt. Capital gain distributions, if paid by the Funds, are also taxable at the federal level.

What is a capital gain distribution?
A capital gain is a profit that a mutual fund realizes by selling securities for a price higher than at which they were purchased. Capital gains must also be paid to shareholders at least once per year. When distributed to shareholders, any realized gains are offset by any realized losses resulting in a distribution of the net capital gain. Unrealized gains on investments that have increased in value but have not been sold by the fund are not required to be distributed. The daily NAV includes unrealized gains.

Capital gain distributions paid by a mutual fund are taxable and reported on IRS Form 1099-DIV. Form 1099-DIV is not applicable to IRAs and other tax-deferred accounts.

What is the difference between long and short-term capital gains?
Short-term capital gains are from the sale of assets the fund held one year or less and are taxable as ordinary income. Long-term capital gains are from the sale of assets the fund held more than one year and generally qualify for lower tax rates.

How will capital gains and dividend distributions affect my taxes?
Mutual fund capital gain and dividend distributions are taxable, both when reinvested and paid out in cash, for the year in which they are received; except when earned on qualified retirement accounts (i.e., 401(k), 403(b), IRA). If dividend and capital gain distributions are taken in cash on a qualified account, this is considered a distribution from the account and may be taxable.

Dividend distributions are taxed at the ordinary income tax rates unless the dividends are qualified. Qualified dividends are dividends that the mutual fund has received from certain domestic and foreign corporations. Qualified dividends are taxed at the same rates as long-term capital gains.

Long-term (held more than one year) capital gains distributions are taxed at long-term capital gains tax rates; distributions of short-term (held one year or less) capital gains are taxed at the same rates as ordinary income.

How will I receive the tax information regarding capital gain distribution?
Thrivent Mutual Funds provides estimated capital gain information with the third quarter statements each year. The information is also available online and will be updated monthly until the distributions are made. The estimated capital gain information is subject to change based upon fund activity.

Your fourth quarter statement will include the amounts of any capital gain distributions made for the fund. This information will also be available online. Capital gain distributions are reported on Form 1099-DIV. For tax purposes, you will need to use Form 1099-DIV to obtain the proper allocation of dividend and capital gain information.

Should I wait to buy a fund until after the dividend or capital gain distributions are made?
If you are considering purchasing a mutual fund within a qualified retirement account, a dividend or capital gain distribution should not affect the timing of your investment decision since typically they do not have any tax consequences while the assets remain in the account.

For new investments within a taxable account, upcoming distributions raise some considerations. The distributions will result in taxable income and should be considered in the timing of your overall investment decision.

There is usually no taxable benefit to purchasing the shares immediately before the distribution (sometimes referred to as "buying the distribution") since the share price will be adjusted by the same amount as the distribution. You should also keep in mind the amount of the distribution based on the size of your expected investment.

While important, tax consequences should be only one of many factors considered when deciding to purchase a mutual fund.

Is the fund's share price affected when a dividend or capital gain distribution is paid?
On the distribution date, the fund net asset value (NAV) is reduced by the amount of the distribution. (The fund NAV also reflects any changes in security valuations on the day the distribution is paid.)

Does a fund's dividend or capital gain distribution affect its total return?
Total return includes distributions (capital gains and dividends) as well as capital appreciation (rise or fall in NAV). Positive dividend and capital gain distributions will have a positive effect on the total return. An investor’s total return will also vary depending on whether the distributions are reinvested or kept as cash.

Dividends and Capital Gain Distributions FAQs (2024)

FAQs

Dividends and Capital Gain Distributions FAQs? ›

Qualified dividends are taxed at the same rates as long-term capital gains. Long-term (held more than one year) capital gains distributions are taxed at long-term capital gains tax rates; distributions of short-term (held one year or less) capital gains are taxed at the same rates as ordinary income.

What is the difference between a dividend distribution and a capital gain distribution? ›

A. A mutual fund dividend is income earned by the fund from dividends and interest paid by the fund's holdings. A capital gain distribution occurs when the fund sells assets during the year and the gains on those sales exceed the losses.

How do dividends affect capital gains? ›

Dividends can be ordinary or qualified, and all ordinary dividends are taxable as income. Qualified dividends receive the lower capital gains rate. So, qualified dividends are capital gains for tax purposes. As a practical matter, most stock dividends in the U.S. qualify to be taxed as capital gains.

Are capital gains distributions included in ordinary dividends? ›

Long-term capital gain distributions are taxed at long-term capital gains tax rates; distributions from short-term capital gains and net investment income (interest and dividends) are taxed as dividends at ordinary income tax rates. Ordinary income tax rates generally are higher than long-term capital gains tax rates.

Do I need to report capital gain distributions? ›

Consider capital gain distributions as long-term capital gains no matter how long you've owned shares in the mutual fund. Report the amount shown in box 2a of Form 1099-DIV on line 13 of Schedule D (Form 1040), Capital Gains and Losses.

How do you avoid capital gains distributions? ›

The best way to avoid the capital gains distributions associated with mutual funds is to invest in exchange-traded-funds (ETFs) instead. ETFs are structured in a way that allows for more efficient tax management.

Which is better for taxes dividends or capital gains? ›

Capital gains are charged with high tax amounts, while dividends have low taxes. Investors who get dividends vs. capital gains are applicable to pay tax on these gains. The tax on net capital gains depends on the asset being sold, whether long-term or short-term.

Is it better to reinvest dividends and capital gains? ›

Given that much higher return potential, investors should consider automatically reinvesting all their dividends unless: They need the money to cover expenses. They specifically plan to use the money to make other investments, such as by allocating the payments from income stocks to buy growth stocks.

Do dividends offset capital gains? ›

Capital gains do not include ordinary income, such as interest or dividend income. Although qualified dividends are taxed at long-term capital gains rates under current tax law, you cannot use capital losses to directly offset qualified dividends.

How much dividend income is tax free? ›

Your “qualified” dividends may be taxed at 0% if your taxable income falls below $44,625 (if single or Married Filing Separately), $59,750 (if Head of Household), or $89,250 (if (Married Filing Jointly or qualifying widow/widower) (tax year 2023). Above those thresholds, the qualified dividend tax rate is 15%.

Are dividends and capital gains considered earned income? ›

Unearned Income. Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust.

Why does my 1099-div show capital gains? ›

Federal regulations require companies to report all dividend and capital gain distributions greater than $10 to shareholders and to the IRS on Form 1099-DIV, regardless of when the shareholder reinvested or received dividends in cash. These distributions are taxable in the year received.

How are dividend distributions taxed? ›

How dividends are taxed depends on your income, filing status and whether the dividend is qualified or nonqualified. Qualified dividends are taxed at 0%, 15% or 20% depending on taxable income and filing status. Nonqualified dividends are taxed as income at rates up to 37%.

Are capital gains distributions taxable if reinvested? ›

A capital gains distribution is the investor's share of the proceeds of a fund's sale of stocks and other assets. The investor must pay capital gains taxes on distributions, whether they are taken as cash or reinvested in the fund.

What is the difference between a distribution and a dividend? ›

Dividends are payments by a company out of its profits to investors who own shares in the company. A dividend is usually paid in the form of cash or in additional shares of the company. Distributions are payments made by a 'Fund' like a managed fund or an exchange-traded fund (ETF) to an investor.

What is a downside of dividends and capital gains being reinvested in a mutual fund? ›

Even when distributions are reinvested, shareholders pay taxes on the amounts they receive (unless their assets are held in a tax-advantaged account, such as a traditional IRA or a Roth IRA).

Is a dividend a capital distribution? ›

Most distributions, for example, dividend payments, will be income distributions. S385 ITTOIA05 deals with the meaning of distribution for income tax purposes, see also CTM15120+. A distribution which is not an income distribution will be a capital distribution.

What is the difference between a dividend and a capital dividend? ›

A capital dividend, also called a return of capital, is a payment that a company makes to its investors that is drawn from its paid-in-capital or shareholders' equity. Regular dividends, by contrast, are paid from the company's earnings.

What is a dividend distribution? ›

Dividends are the most common type of distribution from a corporation. They're paid out of the earnings and profits of the corporation. Dividends can be classified either as ordinary or qualified.

What is the difference between a dividend and a capital gain quizlet? ›

Dividend yield = the percentage return the investor expects to earn from the dividend paid by the stock. Capital gain rate = difference between the expected sale price and purchase price divided by current stock price.

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