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A mutual fund dividend is income from dividends and interest, less operating expenses, earned by a mutual fund’s holdings. Income in excess of the fund’s expenses must be paid as a dividend to shareholders at least once per year.

Capital gains and losses may be generated when a portfolio managers sells securities held by a mutual fund. Any realized gains that exceed realized losses are passed on to shareholders in the form of capital gain distributions and must be reported on your tax return (even if they are reinvested). These gains are classified as long or short-term gains and are taxed differently. A gain on the sale of an investment owned for one year or less is considered short-term for federal income tax purposes and is taxed as ordinary income. A gain on the sale of an investment owned for more than one year is considered long term for federal income tax purposes and taxed at long-term capital gains tax rates.

Tax law requires that mutual funds pay substantially all net investment income and net capital gains to their investors, who may elect to either receive cash or reinvest in additional shares of the fund. Net investment income and capital gain distributions are made annually in December. Additionally, certain funds may be subject to an additional distribution, referred to as a spillback distribution.

Spillback distributions are distributions of ordinary and/or capital gains from the previous fiscal year that were not distributed by the end of that year. Spillback distributions must be declared within 9½ months (the fund’s extended tax return due date) of the end of the fund’s fiscal year. The extended tax return due dates are July 15th and October 15th for the September 30th and December 31st fiscal year end funds, respectively. Even though they represent ordinary income and/or capital gains earned by the fund in the previous fiscal year, they are taxable in the year in which they are paid.


No. Distributions do not impact total return. Although the NAV will drop when the distribution is paid, shareholders who reinvest their distributions will also receive more shares.

Shareholders are responsible for paying taxes on distributions they receive each year, whether they receive the distributions in cash or reinvest them in additional shares of the fund. The funds report distributions to shareholders on IRS Form 1099-DIV at the end of each calendar year. Certain types of fund accounts, such as Individual Retirement and 401(k) accounts, are tax-advantaged. Therefore, shareholders who own these types of accounts pay taxes, if any, on fund distributions only when money is withdrawn from the account and will receive different IRS reports. Please consult with your tax advisor.

Information about a fund’s realized and unrealized capital gains, including available capital loss carryforwards, can be found in the fund’s semi-annual and annual reports to shareholders. Realized and unrealized capital gains reported in the fund’s financial statements do not include all tax adjustments.

Capital gain estimates for the funds expected to pay capital gains in December will be posted to the website in early November.

Record Date: Shareholders who purchase fund shares before or on the record date (shareholders of record) are eligible to receive the distribution.

Ex-Date: The Fund’s NAV will be reduced by the amount of the distribution on this day. Shareholders who purchase fund shares on the ex-date are not eligible to receive the distribution.

Payable Date: Distributions will be paid to shareholders of record on this day. Shares are reinvested at the NAV per share on the ex-dividend date.

Please keep in mind that the information provided in the Tax Center is neither tax nor legal advice. You should speak to your tax professional for specific information regarding your tax situation.

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