December 10, 2009
Let's review how mutual fund investments affect your taxes and what you can do to shrink the bite.
If you own mutual funds, this is the time of year when many funds pay capital gains distributions. Even if your fund reinvests the distributions, they are taxable (unless your fund is held in a retirement plan). In 2008 most funds paid no capital gains for obvious reasons. But with the stock market coming back strong, many funds have once again paid gains, or will pay them before the end of December. The first step is to quantify: how much in taxable gains will you receive? You will see the amount on your statement (for funds that have not yet paid, your advisor can give you an estimate). The next step is to see if you have any capital losses that might offset your gains so you pay little or no tax. Tomorrow, I'll address a couple of ways to do that.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).