Frequently Asked Questions
What are the tax rates on dividends and capital gains?
Traditional and Roth IRA
The contribution limit for Coverdell Education Savings Accounts (ESAs, formerly known as "Education IRAs") is $2,000, and contributions can be made until your tax filing date.
So what exactly is a capital gain?There can be two sources of capital gains for a mutual fund shareholder:
Why would I have to pay tax on a capital gain distribution when my fund's share price has decreased?Capital gain distributions occur independently of price fluctuations in a fund. A mutual fund is required to distribute annual income and/or capital gains to its shareholders. At the same time, changes in financial markets can cause the price of fund shares to go up or down.
Do I pay taxes on reinvested dividends?Yes, reinvested distributions are taxed the same as cash distributions.
What are the tax implications
of a municipal fund investment?
Tax-free funds are mutual funds whose income dividends are earned from bonds issued by a municipality and are generally exempt from federal income tax. A portion of the federally exempt interest dividends from some state-specific tax-free Wells Fargo Advantage Funds® may be exempt from state income tax, especially if you live in the state of issue.
State-specific tax-free funds are mutual funds whose income dividends are earned from bonds issued by a municipality in a particular state and are generally exempt from federal and that state's income tax. A portion of the federally exempt interest dividends from some state-specific tax-free Wells Fargo Advantage Funds may be exempt from state income tax, especially if you live in the state of issue. Income from territorial obligations (Guam, Puerto Rico, and the U.S. Virgin Islands) is generally exempt from both federal and state personal income taxes.
Capital gains may be realized by the fund and passed through to the shareholder as distributions. All capital gains are taxable and will be reported to you on Form 1099-DIV.
A mutual fund whose income dividends are earned from U.S. Treasury and certain other government securities may be categorized as a fund containing U.S. government obligations. Income from mutual fund investments in U.S. government obligations may be exempt from state personal income taxes. Some states, such as California, Connecticut, and New York, impose restrictions on the fund's ability to pass through to you the exempt nature of this interest income.
I've redeemed shares from my account. What do I need to know about calculating my cost basis?First, review our Cost Basis article. Once you've chosen one of the methods, keep these key points in mind:
For more information on any of these topics, refer to Internal Revenue Service Publication 550, Investment Income and Expenses.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.
Stock fund values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond fund values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond fund values fall and investors may lose principal value. Some funds, including nondiversified funds and funds investing in foreign investments, high-yield bonds, small- and mid-cap stocks, and/or more volatile segments of the economy, entail additional risk and may not be appropriate for all investors. Consult a fund's prospectus for additional information on these and other risks.
A portion of the fund's income may be subject to federal, state, and/or local income taxes or the alternative minimum tax (AMT). Any capital gains distributions may be taxable.
Any tax or legal information in this website is merely a summary of our understanding and interpretations of some of the current income tax regulations and is not exhaustive. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation. Wells Fargo Funds Management, LLC, Wells Fargo Funds Distributor, LLC, nor any of their representatives may give legal or tax advice.