Question

I have dividends that were reinvested in full. Why do I have to pay tax on these re-invested dividends, and will my funds be taxed again when I sell the stock?

Forum|Forum|7 years ago
June 4, 2019
2 replies
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TurboTax Premier Online

Reinvested dividends are taxed when earned and then add to your cost basis in the investment for capital gains purposes.

For example, you invested $1,000 in a mutual fund and have earned and reinvested $50 in dividends. As a result, your cost basis is $1,050. If you sell all of your fund shares for $1,110, your taxable capital gain would be $60, not the $110 difference between what you originally paid for the fund shares and your selling value. You need to keep track of every share.

Please find additional information here. https://finance.zacks.com/pay-capital-gains-tax-only-sell-reinvested-dividends-2449.html

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C

crp44

I have dividends that were reinvested Why do i have to pay tax on them until I have them in hand?

Rick19744

Employee

This is due to the fact that you did "technically" receive the dividends, however, you chose to reinvest them in purchasing additional stock instead of taking the cash.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.