Yes, short-term capital gains do not benefit from any special tax rate – they are taxed at the same rate as your ordinary income. For 2017, ordinary tax rates range from 10 percent to 39.6 percent, depending on your total taxable income.
Here is more information: Guide to Short-term vs Long-Term Capital Gains Tax
I suspect that the short-term capital gains are already included in the total ordinary dividents on line 1a. It is posted on the new 1099 with an asterisk indicating that it is a footnote. It doesn't seem to make sense that you should have to add them together. Can someone please confirm that?
Mutual Funds report capital gain distributions on Form 1099-DIV. Short-term capital gains distributions are included with dividend and income distributions and are reported on tax returns as ordinary dividends on line 3b of the 2019 Form 1040. Long-term capital gains distributions are reported on line 6.
That really didn’t answer the question. Can you please read the question again?
Thanks
Short term capital gains are included in box 1A because they are taxed at the same rate as dividends that are not qualified dividends. Your Advisor is correct about that.
According to the tax code, short- and long-term losses must be used first to offset gains of the same type. Let's define some things.
Short term capital gain or loss- bought and sold qualifying investment in less than a year's time.
Taxation of short term gain - It is subject to ordinary income tax, taxed at the same percentage as your regular income.
Included in box 1 on 1099-DIV. The Instructions for 1099-DIV states: Box 1a. Total Ordinary Dividends
Enter dividends, including dividends from money market funds, net short-term capital gains from mutual funds, and other distributions on stock. Include reinvested dividends and section 404(k) dividends paid directly from the corporation. Box 1a includes amounts entered in boxes 1b and 2e and it also includes the amount of the recipient's share of investment expenses that you report in box 6.
Long-term capital gain or loss -qualifying investment that has been owned for longer than 12 months at the time of sale
Taxation of long term capital gain - special charts with tax rates of 0% for many to a max of 20%.
The tax code allows joint filers to apply up to $3,000 a year in capital losses to reduce ordinary income, which is taxed at the same rate as short-term capital gains.
If you look at the sch D, you see the first section nets Short term gains and losses. The second section nets long term gains and losses. The last section will let you add and compare, you may qualify for up to $3,000 loss, using ordinary income tax tables.. Please see About Schedule D (Form 1040 or 1040-SR), Capital Gains and Losses
If you bought and then sold a mutual fund within a year for a gain, then that would be a short term capital gain that could be offset by long term loss.
However, if the Mutual Fund distributes a short term capital gain, then that is treated as a dividend on your 1099.
One way of thinking about it is that the Mutual Fund is the one who experienced the short term gain and is just distributing that income to the fund holder. The tax code specifies that the distributed short term gains cannot be used to offset by long term losses and should be treated as nonqualified dividends.