What are the tax benefits and problems from investing in a foreign mutual fund?
Dividends from funds investing in foreign stocks may qualify for the 15%/5%/0% rate on dividends. If your fund invests in foreign stocks or bonds, part of the income it distributes may have been subject to foreign tax withholding. If so, you may be entitled to a tax deduction or credit for your pro-rata share of taxes paid. Your fund will provide you with the necessary information. Tip: Because a tax credit provides a dollar-for-dollar offset against your tax bill, while a deduction reduces the amount of income on which you must pay tax, it is generally advantageous to claim the foreign tax credit. If you go the credit route, you may need to attach a special form to your Form 1040, depending on the amount of credit involved. Also See… Financial Planning Developing a Financial Plan: Frequently Asked Questions Investment Options: Frequently Asked Questions Annuities: Frequently Asked Questions Bonds: Frequently Asked Questions Stocks: Frequently Asked Questions Saving For College: Freq
Dividends from funds investing in foreign stocks may qualify for the 15%/5%/0% rate on dividends. If your fund invests in foreign stocks or bonds, part of the income it distributes may have been subject to foreign tax withholding. If so, you may be entitled to a tax deduction or credit for your pro-rata share of taxes paid. Your fund will provide you with the necessary information. Tip: Because a tax credit provides a dollar-for-dollar offset against your tax bill, while a deduction reduces the amount of income on which you must pay tax, it is generally advantageous to claim the foreign tax credit. If you go the credit route, you may need to attach a special form to your Form 1040, depending on the amount of credit involved.
A. Dividends from funds investing in foreign stocks may qualify for the 15%/5% rate on dividends. If your fund invests in foreign stocks or bonds, part of the income it distributes may have been subject to foreign tax withholding. If so, you may be entitled to a tax deduction or credit for your pro-rata share of taxes paid. Your fund will provide you with the necessary information.
