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Don’t overlook reinvested dividends

March 3, 2014

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One of the most common mistakes investors make is forgetting to increase their basis in mutual funds to reflect reinvested dividends. Many mutual fund investors automatically reinvest dividends in additional shares of the fund. These reinvestments increase tax basis in the fund, which reduces capital gain (or increases capital loss) when the shares are sold.

If you neglect to include reinvested dividends in your basis, you’ll end up paying tax twice: first on the dividends when they’re reported to you on Form 1099-DIV, and again when you sell the shares and the reinvested dividends are included in the proceeds.

To help ensure you’re properly accounting for dividend reinvestments when you’re filing your 2013 tax return — or for other tax-smart strategies for your investments — contact us today.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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