Free for 90 days: Sign up now and get 90 days managed free after your first deposit. See offer details

<title>Dismiss</title>
Tax Filing Preparation

Reporting Investment Income on Your Taxes: Foreign, U.S. Government, and State

Investing in a globally diversified portfolio means that your taxes will have an added layer of complexity.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center
Published: January 7, 2019 | Updated: January 8, 2019

TABLE OF CONTENTS


With Betterment, you can automatically import your tax information into TurboTax, H&R Block, and TaxAct. We do not currently support integration with Quicken. The soonest you can start importing is Feb. 15, 2019, when all your tax forms will be ready.

Please note that Betterment is not a tax advisor and the information provided should not be construed as tax advice, but should be used for informational purposes only. If you are not comfortable making these calculations, we suggest getting professional tax assistance. Please consult a qualified tax professional or the IRS to determine the rules that apply to your individual tax situation.

How can I find my foreign-sourced income?

As reported on your 1099-DIV, your Betterment accounts may have earned foreign-sourced income via dividends, resulting in foreign taxes. This is due to the fact that your taxable investment accounts may be invested in foreign stock and bond ETFs, since Betterment’s portfolio is globally diversified.

When filing your tax return, you may be required to report foreign-sourced income, which means you’ll need to report the total of all the foreign-sourced dividend income that you earned. Betterment has calculated this figure for you, which you can find on your Supplemental Tax Statement in the Documents section of your account under the Tax Forms tab.

If you’re using TurboTax, entering your foreign ordinary dividend amount is likely to look like this:

TurboTax Foreign Ordinary Dividends Screenshot

If you’re using TurboTax, entering your foreign qualified dividend amount is likely to look like this:

TurboTax Foreign Qualified Dividends Screenshot

A related step—which tax software will likely prompt you to answer—is to identify which foreign country your income came from. If all of your foreign-sourced income resulted from investments with Betterment, because we use regulated investment products (ETFs), you can simply report this income as “RIC”—a regulated investment company.

Here’s an example of how this question is asked in TurboTax:

TurboTax Where Did Dividends Come From RIC Screenshot

Please consult a qualified tax professional and refer to IRS Publication 514, IRS Form 1116, and IRS Publication 17 to determine the rules that apply to your individual tax situation.

How can I find my state-specific municipal bond ETF interest?

A portion of the dividend income from your municipal bond ETF holdings may be exempt from state income tax, depending on your state’s tax laws. Betterment has calculated this for you, based on your state of residence listed within your account. Simply head to the Documents section of your account and then click the Tax Forms tab to download your Supplemental Tax Statement, which will contain this figure.

If your residence has changed or you need to calculate the figure yourself, please consult materials from the fund provider. We will update this article with a link to the fund provider’s website along with calculation instructions by 2/1/19.

How can I find my U.S. Government interest income?

As reported on your 1099-DIV, your Betterment account may have earned U.S. Government interest income due to bond dividends. This is because your taxable investment accounts may be invested in U.S. Government bonds through bond ETFs, per Betterment’s advice.

Generally, the U.S. Government interest portion of a fund dividend income is exempt from state and local income taxes. However, there are some states (NY, CT, and CA) that have an “asset test” which requires 50% of the fund’s assets to be U.S. Government bonds to qualify for a percentage of the fund’s income to be exempt from state and local income taxes.

When filing your state tax return, you may be required to determine the percentage of the dividend related to U.S. Government interest. Betterment has calculated this figure for you, which you can find on your Supplemental Tax Statement in the Documents section of your account under the Tax Forms tab.

If you’re using TurboTax, entering your U.S. Government ordinary dividend amount is likely to look like this:

TurboTax Do You Have US Government Interest Screenshot
TurboTax How Much US Government Interest Screenshot

 

Recommended Content

View All Resources
Filing Tax Forms as an Investor: 1099-B, 1099-DIV, 1099-R, and 5498

Filing Tax Forms as an Investor: 1099-B, 1099-DIV, 1099-R, and 5498

Your tax forms will be ready on Feb. 15, 2019. Find answers to common tax filing questions we hear from investors like you.

Redesigning How You Manage Your Finances at Betterment

Redesigning How You Manage Your Finances at Betterment

Our new design represents a synthesis of a large body of customer feedback. We hope it meets your expectations.

Reporting Investment Income on Your Taxes: Foreign, U.S. Government, and State

Reporting Investment Income on Your Taxes: Foreign, U.S. Government, and State

Investing in a globally diversified portfolio means that your taxes will have an added layer of complexity.

Explore your first goal

Safety Net

This is a great place to start—an emergency fund for life's unplanned hiccups. A safety net is a conservative portfolio.

Retirement

Whether it's a long way off or just around the corner, we'll help you save for the retirement you deserve.

General Investing

If you want to invest and build wealth over time, then this is the goal for you. This is an excellent goal type for unknown future needs or money you plan to pass to future generations.

Smart Saver

You could earn 20X more than a typical savings account with our low-risk investing account for your extra cash.

How would you like to get started?

Your first step toward a smarter investing future starts here.

Create a Betterment account

Go ahead and join the smart, modern way to invest.

See what we can do for you

Tell us a bit about yourself, and we'll show you the benefits of investing with us.

Get a free investing checkup

Help us get a sense of your investing approach and see how you could improve.

Transfer a 401(k) or an IRA

Move an existing retirement account into a Betterment IRA.

Download the mobile app

Enjoy the Betterment experience anywhere on the go.

<title>Close</title>

Search our site

For more information and disclosures about the Betterment Resource Center, click here. | See our contributors.