How are mutual fund distributions taxed?

A. You must generally report as income any mutual fund distribution, whether or not it is reinvested. The tax law generally treats mutual fund shareholders as if they directly owned a proportionate share of the fund's portfolio of securities. (The fund itself is not taxed on its income if certain tests are met and substantially all of its income is distributed to its shareholders.) Thus, all dividends and interest from securities in the portfolio, as well as any capital gains from the sales of securities, are taxed to the shareholders. There are two types of taxable distributions: ordinary dividends and capital gain distributions. Distributions of ordinary dividends, which come from the interest and dividends earned by securities in the fund's portfolio, represent the net earnings of the fund. They are paid out periodically to shareholders. Like the return on any other investment, mutual fund dividend payments decline or rise from year to year, depending on the income earned by the fun ... more

You must generally report as income any mutual fund distribution, whether or not it is reinvested. The tax law generally treats mutual fund shareholders as if they directly owned a proportionate share of the fund's portfolio of securities. (The fund itself is not taxed on its income if certain tests are met and substantially all of its income is distributed to its shareholders.) Thus, all dividends and interest from securities in the portfolio, as well as any capital gains from the sales of securities, are taxed to the shareholders. There are two types of taxable distributions: ordinary dividends and capital gain distributions. Distributions of ordinary dividends, which come from the interest and dividends earned by securities in the fund's portfolio, represent the net earnings of the fund. They are paid out periodically to shareholders. Like the return on any other investment, mutual fund dividend payments decline or rise from year to year, depending on the income earned by the fund i ... more

You must generally report as income any mutual fund distribution, whether or not it is reinvested. The tax law generally treats mutual fund shareholders as if they directly owned a proportionate share of the fund's portfolio of securities. (The fund itself is not taxed on its income if certain tests are met and substantially all of its income is distributed to its shareholders.) Thus, all dividends and interest from securities in the portfolio, as well as any capital gains from the sales of securities, are taxed to the shareholders. ... more

Outside of registered plans, distributions are taxed according to their type : • Other income is taxed at your top personal marginal tax rate • Dividends from Canadian corporations are classified as eligible or non-eligible and taxed at two levels. Both levels are at a lower rate than other income. Dividend income is grossed up and you may qualify for a dividend tax credit, resulting in a lower effective tax rate than other income. The gross up and dividend tax credit will be different depending on whether the dividend qualifies as a eligible dividend or a non-eligible dividend • Foreign non-business income is fully taxable at your top personal marginal tax rate, but you may also be allocated the associated foreign non-business income tax, which you may be able to use to claim a foreign tax credit against your income tax liability • Capital gains may be generated upon the sale of securities by a mutual fund. Capital gains receive preferential tax treatment. ... more