1. Home
  2. Taxes General Forum
  3. Taxability of CGDs from State Tax Free Bond Fund

Taxability of CGDs from State Tax Free Bond Fund

I received short and long-term CGDs in December 2022 from my Maryland Tax-Free Bond Fund (MDXBX) investment. This rarely occurs - I read the last year of CGDs was 2018. My broker 1099-DIV statement included the short and long-term CGDs on lines 1 and 2.

Monthly dividends are completely tax free as I am a Maryland resident. Understand if I sell shares and realize gains, those gains are taxable.

How about CGDs?

Reply to
Dimitrios Paskoudniakis
Loading thread data ...

The state tax treatment of fund dividends can be determined by multiplying the percentage by the fund's tax-free dividend income as shown in Box 12 of the Form 1099-DIV.

With regards to the taxability of CGDs (capital gain distributions) from a Maryland Tax-Free Bond Fund, there are couple things to consider:

  1. Municipal bonds, which include state tax-free bond funds, are taxed in two ways - on the income that is distributed and on any gains if the investment is sold at a profit.
  2. Bond funds, including tax-free bond funds, are taxed based on the income that is distributed and on any gains if the investment is sold at a profit.

It appears that CGDs from state tax-free bond funds may be taxable. It is recommended to consult a tax professional or refer to the official tax laws in the state of Maryland to get a clear understanding of the taxability of the CGDs from your Maryland Tax-Free Bond Fund.

Reply to
Smart Bean

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.