Ian Salisbury for The Wall Street Journal reports that the year-end tax statements arriving from mutual fund companies during the next few weeks could have some steep capital gains tax bills attached. This is the culmination of good stock market returns during the past few years and it is too late to adjust fund-related taxes for April.
It isn’t too late to consider 2008 for the next time around, however, because paying Uncle Sam is inevitable. Here are a few pointers:
- Shop tax payer-friendly funds: Some fund aim specifically at avoiding passing out capital gains.
- Consider ETFs: Broad-based ETFs are great because they don’t trade much and rarely pass out capital gains.
- Check out after-tax returns: It’s a good indicator of a fund’s performance.
- Put active funds into retirement accounts: Keep your tax-friendly funds in a taxable account and other that trade frequently in an individual retirement account.
- Tax-loss selling: Harvesting losses by selling them can be effective. Take a look at our how-to on the subject.
- Think twice about buying in December: This is a quick tax bill, so hold out and wait until January.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.