Do I get pretaxed on the $$ I submit to a mutual fund, and then taxed again when I take it out?
2007-10-07 14:17:57 · 5 answers · asked by nikayw 2 in Business & Finance ➔ Taxes ➔ United States
You get taxed on the intrest alone. Keep track of what you put in. Contributions can generally be figured out but also can be laborious.
2007-10-07 14:23:52 · answer #1 · answered by lint 6 · 0⤊ 0⤋
You get taxed on earnings, so you are not taxed on money you put into a mutual fund. You may have paid taxes on the salary you earned to get that money, but if, for example, the money was an inheritance or a gift, you wouldn't have been taxed on it.
You are also not taxed on the same money when you take it out. You will be taxed only on the income from the fund (dividends) and the gains when you sell the fund.
If the fund is inside a 401k or IRA the answer is slightly different. Then the mutual fund is irrelevant. Again you are not taxed on the money you actually put in. In fact, you may not even be taxed on the money you earned to put in.
If you put in money that has not been taxed, you will be taxed on all the money you eventually take out.
If it is a Roth IRA or Roth 401k, you will have paid taxes on the money when you earned it, but no additional taxes when you save it, and no taxes when you take it out at retirement.
2007-10-07 21:32:03 · answer #2 · answered by CarVolunteer 6 · 0⤊ 0⤋
That depends. If you open a non-tax sheltered mutual fund, you will pay ordinary income taxes on any gains from the fund at the end of the year. If you open a Roth IRA, contributions come from taxed salary but once in the account, the funds grow tax free and are withdrawn tax free*. With a tradional IRA, contributions are tax deferred so the IRA grows tax free, but you will owe taxes on withdrawals.
2007-10-07 21:24:35 · answer #3 · answered by personalfinancedaily 3 · 1⤊ 0⤋
Not on the same dollars. You pay income tax when you earn the money you invest. When you take the money out of the fund, you only pay tax (capital gains) on the appreciation, not on what you put in.
2007-10-07 21:40:09 · answer #4 · answered by Judy 7 · 1⤊ 0⤋
ask the broker if the fund is FRONT LOADED or BACK loaded, meaning, do they take out their fees BEFORE or after they make the investment? You are MUCH better off without a front load, so all your money works for you until you sell the investment.
2007-10-07 21:59:35 · answer #5 · answered by Mike 7 · 0⤊ 0⤋