TAX RESOURCE CENTER
When will I receive my IRS Form 1099-DIV?
Your Form 1099-DIV will generally be mailed by January 31. You can also access it online through your account.
For Thrivent mutual funds that invest in REITs (real estate investment trusts), forms will be mailed and available online mid-February:
Federal regulations require companies to report all dividend and capital gain distributions greater than $10 to shareholders and to the IRS on Form 1099-DIV, regardless of when the shareholder reinvested or received dividends in cash. These distributions are taxable in the year received.
Why didn't I receive a Form 1099-DIV?
Shareholders with dividends and short-term capital gain distributions under $10 will not receive a Form 1099-DIV. The IRS does not require 1099 Forms in cases where the interest, dividends or short-term capital gain distributions are under $10. However, the IRS does require individuals to report these amounts under $10 on their tax returns. Shareholders can check their year-end statements to verify the total amount of dividends and capital gains for an account. If you don't know whether to include this amount, please consult your tax advisor.
What is a dividend distribution?
A dividend distribution is income from dividends and interest earned by a mutual fund's holdings. Dividends that a fund earns must be paid to shareholders at least once per year.
What are qualified dividends?
Per the IRS, qualified dividends are ordinary dividends meeting specific criteria so they can be taxed at a lower long-term capital gains tax rate.
When are dividends and capital gains paid?
Thrivent Mutual Funds distribution policy is as follows: money market and most bond funds generally declare income dividends daily and distribute them monthly. Income dividends are often paid quarterly for balanced funds (stocks, bonds, and cash). Capital gains (if required) for equity and bond funds are generally paid after fiscal year-end and before calendar year-end. Thrivent Mutual Funds typically distributes capital gains in December.
How do I determine if I will receive a dividend or capital gain distribution and when I will receive it?
The fund's prospectus indicates the dividend schedule followed. Thrivent Mutual Funds generally distributes capital gain distributions annually in December. The timing of a distribution and the determination of which shareholder is eligible to receive it is based upon the record date. The date the distribution is paid is the ex-dividend date.
Is a return of capital (nontaxable distribution) reported on my IRS Form 1040?
Return of capital distributions are generally not taxed unless the return of capital amount exceeds the cost basis of the mutual fund shares you own. The return of capital distribution reduces your cost basis for the mutual fund shares. If cost basis is available for your account, the applicable adjustments are made for return of capital distributions.
Why are some of the dividends from the Thrivent Municipal Bond Fund and Thrivent High Income Municipal Bond Fund subject to the AMT?
The portion of earnings subject to the Alternative Minimum Tax (AMT) calculation for each fund comes from the Fund’s investment in private activity municipal bonds. See the following percentage of federal tax-exempt dividends that are subject to the AMT.
How are the dividends earned on the Thrivent Municipal Bond Fund and Thrivent High Income Municipal Bond Fund taxed at the state level?
For the most part, all the distributions you received from the Thrivent Municipal Bond Fund and the Thrivent High Income Municipal Bond Fund are taxable at the state level. However, some states do not tax their residents on interest attributed to municipal securities issued by that state. See the State Tax Information for Federal Tax-Exempt Dividends page for more information.
Why aren’t all of the dividends from the Thrivent Municipal Bond Fund and Thrivent High Income Municipal Bond Fund exempt from federal income tax?
Most of the dividends paid by the Thrivent Municipal Bond Fund and the Thrivent High Income Municipal Bond Fund are exempt from federal income tax because the Funds primarily invest in municipal bonds that are tax-exempt. However, a small portion of the dividends paid by the Funds are considered taxable income because some bonds were purchased at a discount to the market. This discount results when the purchase price is lower than the issue price of the bond. The difference is accrued as taxable income for the bond’s life and is not tax-exempt. Capital gain distributions, if paid by the Funds, are also taxable at the federal level.
What is a capital gain distribution?
A capital gain is a profit that a mutual fund realizes by selling securities for a price higher than at which they were purchased. Capital gains must also be paid to shareholders at least once per year. When distributed to shareholders, any realized gains are offset by any realized losses resulting in a distribution of the net capital gain. Unrealized gains on investments that have increased in value but have not been sold by the fund are not required to be distributed. The daily NAV includes unrealized gains.
Capital gain distributions paid by a mutual fund are taxable and reported on IRS Form 1099-DIV. Form 1099-DIV is not applicable to IRAs and other tax-deferred accounts.
What is the difference between long and short-term capital gains?
Short-term capital gains are from the sale of assets the fund held one year or less and are taxable as ordinary income. Long-term capital gains are from the sale of assets the fund held more than one year and generally qualify for lower tax rates.
How will capital gains and dividend distributions affect my taxes?
Mutual fund capital gain and dividend distributions are taxable, both when reinvested and paid out in cash, for the year in which they are received; except when earned on qualified retirement accounts (i.e., 401(k), 403(b), IRA). If dividend and capital gain distributions are taken in cash on a qualified account, this is considered a distribution from the account and may be taxable.
Dividend distributions are taxed at the ordinary income tax rates unless the dividends are qualified. Qualified dividends are dividends that the mutual fund has received from certain domestic and foreign corporations. Qualified dividends are taxed at the same rates as long-term capital gains.
Long-term (held more than one year) capital gains distributions are taxed at long-term capital gains tax rates; distributions of short-term (held one year or less) capital gains are taxed at the same rates as ordinary income.
How will I receive the tax information regarding capital gain distribution?
Thrivent Mutual Funds provides estimated capital gain information with the third quarter statements each year. The information is also available online and will be updated monthly until the distributions are made. The estimated capital gain information is subject to change based upon fund activity.
Your fourth quarter statement will include the amounts of any capital gain distributions made for the fund. This information will also be available online. Capital gain distributions are reported on Form 1099-DIV. For tax purposes, you will need to use Form 1099-DIV to obtain the proper allocation of dividend and capital gain information.
Should I wait to buy a fund until after the dividend or capital gain distributions are made?
If you are considering purchasing a mutual fund within a qualified retirement account, a dividend or capital gain distribution should not affect the timing of your investment decision since typically they do not have any tax consequences while the assets remain in the account.
For new investments within a taxable account, upcoming distributions raise some considerations. The distributions will result in taxable income and should be considered in the timing of your overall investment decision.
There is usually no taxable benefit to purchasing the shares immediately before the distribution (sometimes referred to as "buying the distribution") since the share price will be adjusted by the same amount as the distribution. You should also keep in mind the amount of the distribution based on the size of your expected investment.
While important, tax consequences should be only one of many factors considered when deciding to purchase a mutual fund.
Is the fund's share price affected when a dividend or capital gain distribution is paid?
On the distribution date, the fund net asset value (NAV) is reduced by the amount of the distribution. (The fund NAV also reflects any changes in security valuations on the day the distribution is paid.)
Does a fund's dividend or capital gain distribution affect its total return?
Total return includes distributions (capital gains and dividends) as well as capital appreciation (rise or fall in NAV). Positive dividend and capital gain distributions will have a positive effect on the total return. An investor’s total return will also vary depending on whether the distributions are reinvested or kept as cash.
The information provided is not intended as a source for tax, legal or accounting advice. Please consult with a legal and/or tax professional for specific information regarding your individual situation.