How to Calculate My Tax Refund With Mutual Funds

by Lee Nichols

Mutual funds pay investors in one of two ways. Shareholders choose either a direct payout or reinvest into the fund and purchase more shares. The income comes from dividend payments when the fund earns income through interest on the portfolio's securities or dividends, capital gains when the securities increase in value or increased net asset value (NAV) when the market value of the entire fund increases. Mutual fund income is subject to not only income taxes when you receive or reinvest the income, but also personal capital gains taxes based upon the difference in the fund's value from when you purchased shares.

1. Inspect the Form 1099-DIV you received from the mutual fund. Box 1a shows your ordinary dividend income, Box 1b lists your qualified dividend income and Box 2a shows your capital gains.

2. Download Schedules A and B from the Internal Revenue Service. Complete Schedule A, listing all of your deductions. Complete Schedule B with the information from your fund 1099-DIV if your income from the fund exceeded $400. Complete Part III if the totals of Part I or II exceed $1,500.

3. Enter the total amount you show on Part I Line 4 of Schedule B onto Line 8a of your Form 1040. Enter the total amount you show on Part II Line 5 of Schedule B onto Line 9a of your Form 1040.

4. Complete your tax return by entering any other income amounts and transferring your deductions to your Form 1040. Enter the total of any estimated tax payments you made on Line 62.

5. Subtract Line 60 from Line 72 on your Form 1040 to determine your refund.

6. Send Schedules A and B with your return when you file your taxes.


  • The IRS credits any tax you paid to a foreign country on mutual fund income to your tax account.