Investing Basics
Tax Filing Help

Your first step in determining any investment-related taxes you may owe  is to determine whether your accounts are tax-deferred, like an IRA, or whether you have a regular taxable account.

IRAs

If your money is in an IRA, your account earnings are tax-deferred or tax-free, depending on the type of IRA you have. That means that your account is not subject to income tax until you make a withdrawal. Distributions from IRAs are subject to taxes and, if taken before age 59 ½, a 10% premature distribution penalty.

A Regular Taxable Account

If your money is in a regular taxable account, you’ll owe tax on fund distributions (income and capital gains paid or reinvested in your account). Also, when you sell or exchange fund shares, you’ll have to calculate your “basis” (essentially the cost of those shares) to determine the amount of any profit or loss. Profits from the sale of fund shares are taxable.

For more comprehensive information, read the Helpful Tips guide, Simplifying Tax Time.