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I am unsure as to what is the federal tax rate for the distributions of the VBIRX fund. To quote from the product summary for VBIRX

the fund invests about 30% of assets in corporate bonds and 70% in U.S.

From what I understand, the tax rate for corporate bonds is not reduced like the qualified dividend tax rate and since the funds invests ~30% of itself in corporate bonds then I should be paying my regular federal tax rate on the corporate bond portion of my distribution and no taxes on the remaining federal government bond portion right (assuming not AMT)?

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If you were directly invested in government bonds then you would pay no tax, but ANY pass through entity (whether a fund or even a 401K) nullifies that tax status where the existence of the pass through entity creates its own tax event. From my understand you would simply pay the applicable capital gains tax (short term or long term) and would not qualify for any bond government bond related tax breaks.

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