Taxes are an important consideration for mutual fund investing. There are three ways in which a mutual fund can generate income taxes for you if you hold fund shares in a non tax-qualified account.
Exchanges between funds held in a non tax-qualified account may also generate taxes for you because an exchange from one fund into another fund is considered a sale and purchase for tax purposes. Therefore, if the sales proceeds out of the fund differ from your cost basis of the sold shares, the exchange will result in a capital gain or loss. Even if the exchange does not result in a capital gain or loss, your holding period in the new fund will begin as of the date of the exchange, not the date of purchase of the old fund.
Your capital gains and losses are categorized as short term or long term for federal income tax purposes.
The amount of federal income tax you pay depends on your holding period and your particular tax bracket.
Investing involves risk, including potential for loss.
Income may be subject to state and local taxes and (if applicable) the Alternative Minimum Tax.
Securities distributed by State Farm® VP Management Corp.
Neither State Farm® nor its agents provide tax or legal advice.
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