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Unless a fund is held in an IRA or other tax-advantaged account, any investment returns are usually taxed each year. Taxable returns may be generated by the fund itself or by you as a shareholder:
|Type of return||Description||Tax treatment|
|Interest income||Interest payments from bond or money market fund holdings||Taxed as ordinary income at rates as high as 35%|
|Stock dividends||Paid by companies that share profits with stockholders||Taxed at 0% or 15% through 2012 (for qualified dividends)*|
|Short-term capital gains||Profits on the sale of investments held for one year or less||Taxed as ordinary income at rates as high as 35%|
|Long-term capital gains||Profits on the sale of investments held longer than one year||Taxed at 0% or 15% through 2012*|
* Tax rates are 0% for investors in the two lowest tax brackets and 15% for all others.
Generally, a capital loss occurs when an investment is sold for less than its initial purchase price.
Gains or losses on investments held for one year or less are considered short-term. Gains or losses on investments held more than one year are considered long-term.
Capital gains distributed by mutual funds are generally considered short- or long-term based on how long the fund held its underlying securities, not how long you've owned fund shares. You must determine your own holding period when selling fund shares at a profit or loss.
Realized capital gains can occur when an investment is actually sold at a profit. Unrealized capital gains occur when an investment appreciates in value but hasn't yet been sold.
Realized gains may be taxable unless investments are held in a tax-advantaged account, such as an IRA or 401(k). Unrealized gains do not incur taxes.
It depends on what type of account you own. Here are some examples:
A financial professional can tell you more about these accounts, including which may be right for your situation.
You could realize a capital loss to offset some or all of the gain. If losses exceed gains, up to $3,000 can be deducted from ordinary income on your tax return - or up to $1,500 if married filing separately. Any remaining losses can be carried forward to future years.
Important: Consult your advisor to be sure that selling a security at a loss is consistent with your overall investment plan. A financial or tax professional can also inform you about the rules governing investment losses.
J.P. Morgan combines these forms into one convenient report, which is mailed by February 15 for the prior year’s activities. Depending on your circumstances, you may also receive other tax forms. Click here for a complete list.
Your IRS Form 1099-B incorporates the mandatory cost basis reporting rules that took effect after January 1, 2012. These rules require us to provide you with the cost basis for shares acquired and sold on or after January 1, 2012.
Cost basis is generally the dollar amount you paid for the investment shares plus added expenses, such as commissions. You need to know your cost basis so you can determine whether you had a gain or loss on a sale to report on Form 8949
|Average Cost (ACST)||Acquisition prices of shares are averaged to determine the cost per share|
|First in, first out (FIFO)||Shares acquired first are sold first|
|Last in first out (LIFO)||Shares acquired last are sold first|
|Lowest cost, first out (LOFO)||Lowest cost shares are sold first|
|Highest in, first out (HIFO)||Highest cost shares are sold first|
|Loss/gain utilization (LGUT)||Shares sold are evaluated to maximize losses and minimize gains, based on holding period|
|Specific lot identification (SLID)||Specific shares are selected to sell at time of sale|
Bond and money market funds distribute income on a monthly basis. For an estimated schedule of dividend and capital gain distributions, please click the appropriate links below:
|2013 dividend and capital gain schedule|
The information above is not intended to provide and should not be relied on for accounting, legal and tax advice or investment recommendations. The views and strategies described may not be suitable to all readers. Please contact your financial professional or tax advisor for additional information.
Asset allocation/diversification does not guarantee investment returns and does not eliminate the risk of loss.
IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.