You may receive any of the following distributions during the year.
Exempt-interest dividends.
Exempt-interest dividends you receive from a regulated investment company (mutual fund) are not included in your taxable income. You will receive a notice from the mutual fund telling you the amount of the exempt-interest dividends you received. Exempt-interest dividends are not shown on Form 1099-DIV or Form 1099-INT.
Information reporting requirement.
Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. This is an information reporting requirement and does not change the exempt-interest dividends to taxable income.
Alternative minimum tax treatment.
Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. See Alternative Minimum Tax in chapter 31 for more information.
Dividends on insurance policies.
Insurance policy dividends that the insurer keeps and uses to pay your premiums are not taxable. However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company.
If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. (For information on the treatment of a distribution from a modified endowment contract, see Distribution Before Annuity Starting Date From a Nonqualified Plan under Taxation of Nonperiodic Payments in Publication 575, Pension and Annuity Income. ) Report any taxable distributions on insurance policies on line 16b (Form 1040) or line 12b (Form 1040A).
Dividends on veterans’ insurance.
Dividends you receive on veterans’ insurance policies are not taxable. In addition, interest on dividends left with the Department of Veterans Affairs is not taxable.
Patronage dividends.
Generally, patronage dividends you receive in money from a cooperative organization are included in your income.
Do not include in your income patronage dividends you receive on:
- Property bought for your personal use, or
- Capital assets or depreciable property bought for use in your business. But you must reduce the basis (cost) of the items bought. If the dividend is more than the adjusted basis of the assets, you must report the excess as income.
These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative.
Alaska Permanent Fund dividends.
Do not report these amounts as dividends. Instead, report these amounts on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
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