Exempt Interest Dividends (2024)

FAQs

Exempt Interest Dividends? ›

An exempt-interest dividend is a distribution from a mutual fund that is not subject to federal income tax.

Are Exempt Interest Dividends Taxed? Exempt interest dividends from mutual funds aren't taxable, but you should report them on your return if you're required to file. Dividends exempt from interest might be subject to Alternative Minimum Tax (AMT).

You can find tax-exempt interest and dividends information in your 1099 form, on the page that says “Mutual Fund and UIT Supplemental Information.” Since our funds are national, you may need to select “More Than One State” when you file your taxes.

Box 12 represents tax-exempt interest. You have to enter the amount in box 12, but on the next screen, put a checkmark in the first box - A portion of these dividends is US Gov. interest.

Nontaxable dividends are dividends from a mutual fund or some other regulated investment company that are not subject to taxes. These funds are often not taxed because they invest in municipal or other tax-exempt securities.

In the Dividends and Distributions section of your Form 1099, you may have a value in Box 12: “Exempt-interest dividends.” This value represents dividends received from ETFs like MUB, which hold a broad range of U.S. municipal bonds that pay federal tax-exempt dividends.

Also include on line 2a of your Form 1040 or 1040-SR any exempt-interest dividends from a mutual fund or other regulated investment company. This amount should be shown in box 12 of Form 1099-DIV. If an amount is shown in box 9 of Form 1099-INT, you must generally re- port it on line 2g of Form 6251.

Tax-exempt interest is reported on Schedule K in the corporation return. To enter tax-exempt interest in a corporation return, from the Main Menu of the Business Tax Return (Form 1120) select: Schedule K - Other Information. Tax-Exempt Interest Received/Accrued.

Fidelity calculates and reports the portion of tax-exempt interest dividend income that may be exempt from your state and/or local income tax for the state-specific funds in the “State/Local Tax- Exempt Income from Fidelity Funds” section of your 2023 Tax Reporting Statement.

However, some interest you receive may be tax-exempt. You should receive Copy B of Form 1099-INT or Form 1099-OID reporting payments of interest and/or tax-exempt interest of $10 or more. You may receive these forms as part of a composite statement from a broker.

How do you enter exempt interest dividends? ›

Box 12. Shows exempt-interest dividends from a mutual fund or other RIC paid to you during the calendar year. See the Instructions for Form 1040 for where to report. This amount may be subject to backup withholding.

tax-exempt interest income — interest income that is not subject to income tax. Tax-exempt interest income is earned from bonds issued by states, cities, or counties and the District of Columbia.

The most common sources of tax-exempt interest come from municipal bonds or income-producing assets inside of Roth retirement accounts.

Dividends are taxable regardless of whether you take them in cash or reinvest them in the mutual fund that pays them out. You incur the tax liability in the year in which the dividends are reinvested.

Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.

You must report all taxable and tax-exempt interest on your federal income tax return, even if you don't receive a Form 1099-INT or Form 1099-OID. You must give the payer of interest income your correct taxpayer identification number; otherwise, you may be subject to a penalty and backup withholding.

You'll need to show the amount of any tax-exempt interest you received during the tax year. This doesn't convert tax-exempt interest to taxable interest. It's an information-reporting requirement only.

Tax-exempt interest is reported on Schedule K in the corporation return. To enter tax-exempt interest in a corporation return, from the Main Menu of the Business Tax Return (Form 1120) select: Schedule K - Other Information. Tax-Exempt Interest Received/Accrued.

The total amount of tax-exempt income is reported on IRS Form 1099-INT (part of your Tax Reporting Statement). The portion (if any) of that total amount constituting specified private activity bond interest is also reported on the same tax form.