Deferred capital gains tax on mutual funds: Lawmakers pitch rule change

[Pelican Press 0]

This is the hidden content, please

• Sign In
• or
• Sign Up

Deferred capital gains tax on mutual funds: Lawmakers pitch rule change

Artistgndphotography | E+ | Getty Images

If you own mutual funds, year-end payouts can trigger a surprise tax bill — even when you haven’t sold the underlying investment. But some lawmakers want to change that.

Sen. John Cornyn, R-Texas, this week

This is the hidden content, please

• Sign In
• or
• Sign Up

, known as the Generate Retirement Ownership Through Long-Term Holding, or GROWTH, Act. If enacted, the bill would defer reinvested mutual fund capital gains taxes until investors sell their shares.

Bipartisan House lawmakers

This is the hidden content, please

• Sign In
• or
• Sign Up

in March.

Why mutual funds incur capital gains tax

When you own mutual funds in a pre-tax 401(k) or individual retirement account, growth is tax-deferred. But if you hold assets in a brokerage account,

This is the hidden content, please

• Sign In
• or
• Sign Up

More from Personal Finance:
What the House GOP budget bill means for your money
Tax bill includes $1,000 baby bonus in ‘Trump Accounts’
House GOP tax bill passes ‘SALT’ deduction cap of $40,000 

Depending on performance, some mutual funds can ***** off substantial gains during the fourth quarter. In 2024, some paid

This is the hidden content, please

• Sign In
• or
• Sign Up

, Morningstar estimated.

These payouts are subject to long-term capital gains taxes of 0%, 15% or 20%, depending on your taxable income. Some higher earners also pay an extra 3.8% surcharge on investment earnings.

About $7 trillion of long-term mutual fund assets held

This is the hidden content, please

• Sign In
• or
• Sign Up

could be impacted by the legislation, according to the Investment Company Institute, which represents the asset management industry.

Bill would ‘provide parity’ for mutual funds

In a

This is the hidden content, please

• Sign In
• or
• Sign Up

, Cornyn described the mutual fund proposal as a “no-brainer” that would “help provide parity with other investment options.”

If enacted, the proposal would “incentivize Americans to save and invest for their long-term goals” without the stress of an “unexpected tax bill,” Eric Pan, president and CEO of the Investment Company Institute,

This is the hidden content, please

• Sign In
• or
• Sign Up

following the bill’s introduction.

However, it’s unclear whether the bill will advance amid competing priorities. Lawmakers are wrestling over President Donald Trump’s multi-trillion-dollar tax and spending package, which passed in the House on Thursday, and could face hurdles in the Senate.

The U.S. Department of the Treasury has also asked Congress to

This is the hidden content, please

• Sign In
• or
• Sign Up

before August to avert a government shutdown.

Switch to exchange-traded funds

While deferring yearly taxes could benefit some investors, you could also make portfolio changes, financial experts say.

You can avoid mutual fund payouts by

This is the hidden content, please

• Sign In
• or
• Sign Up

Of course, the trade could also trigger taxes if the mutual fund has embedded gains, which may require some planning, he said.

Alternatively, investors could opt to keep mutual funds in tax-deferred accounts, such as pre-tax 401(k)s or IRAs.

This is the hidden content, please

• Sign In
• or
• Sign Up

/applications/core/interface/js/spacer.png">

This is the hidden content, please

• Sign In
• or
• Sign Up

#Deferred #capital #gains #tax #mutual #funds #Lawmakers #pitch #rule #change

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up