The end of the year also means it is time to pay out any realized capital gains from the past year. If you have an IRA or other vehicle with preferable tax implications this is probably a non-event for you, assuming you have been properly invested. However, if you have a taxable account that includes a mutual fund, the implications could be much different.
We are expecting potentially higher capital gain distributions this year than we have previously seen. This may create an unexpected tax burden if the mutual fund is held in a taxable account and the investor is not aware of the issue and monitoring it closely.
Additionally, if an investor has health coverage through the insurance marketplace and currently qualifies for a premium credit, they need to be mindful of the fact that capital gains distributions from investments in an after tax account may impact their income and hence their eligibility for premium credits.
A multitude of factors have created these higher distributions adding to the complexity of the problem. If you are concerned about the tax implications of vehicles in your investment portfolio, we recommend talking to a trusted advisor to determine the best options for the highest gains and the smallest tax implications.