[USER]

Am I wrong? I was today years old when I found out that mutual funds pass on gains to holders when they sell stock and it appears on Form 1099-DIV, Box 2a. I thought I had it all figured out.

Both older parents are now on SS and have a child going to college. We will fill out a FAFSA for school year 26-27 (25-26 was just fine).

If AGI income is under $60,000 no more info about assets is needed and funding will probably come.

Well, these capital gains in that box pushed us over that income limit and in addition more SS $ are taxed, again pushing up AGI even more.

I’m using HR Block software and that’s how it’s playing out.

I will now need to rethink our FI strategies.

[Jonel]

Why are you investing in mutual funds when ETFs are a thing?

[Ron]

Surprise capital gains distributions are unfortunate and suggest that you are holding the wrong funds in your taxable brokerage.

[Patrick]

Is this ever preferable in a taxable account? For example, If they are taxed as long term capital gains now vs.

later when the capital gains rate may increase in the future?

[Jeremy]

Yeah…if the Mutual Fund or ETF realizes capital gains or gets dividends, taxes need to be paid on them.

So, they give you the distribution so you can pay the taxes.

[Sean]

This is why people say that ETFs tend to be more tax efficient than mutual funds.

Vanguard is even has a patented method to help get around this which is talked about quite often as well.

[Mead]

I only have retirement accounts and no brokerage accounts. Would the same theory of ETFs preferred be the case with a 529 acct?

I don’t have yet but thinking of opening for grands.

But they are tax advantaged so therefore would not distribute gains the same way?

Is that correct?

[Amy]

Yes, these are called in-fund capital gains. It’s why ETFs are preferred in taxable accounts, because ETFs manage trades differently than mutual funds and so are able to avoid most in-fund cap gains.

[Jim]

Yes. The December Year end distribution. The gift that keeps on giving and leaves you guessing.

[Author]

Posts