Thanks to CNBC for interviewing our own Phil Mitchell for their article: “These mutual funds are planning to hit investors with capital gains distributions. How to decide the right move for you”
If you are a subscriber you can read the full article HERE, for everyone else here is an excerpt from the CNBC Article:
“It’s also important to know how long you have held the asset before you sell it so you know if you’ll be paying the steeper short-term capital gains tax or the long-term one, said certified public accountant Philip Mitchell, president at Kroon & Mitchell Asset Management in Grand Rapids, Michigan.
Then there is the additional net investment income tax of 3.8% for those married filing jointly with income above $250,000 or those single making $200,000, he said.
Another thing to bear in mind is a higher income resulting from the investment sale may mean you are paying more in Medicare part B premiums, which are based on your modified adjusted gross income, said Mitchell, a member of the personal finance planning executive committee for the Association of International Certified Professional Accountants. It could also affect the amount of taxes you pay on any Social Security benefits, he added.
“Start to add up the pros and cons,” Mitchell said. “It is not always clear cut.”
If you decide to sell after determining your tax liability, be sure to do it before the record date, which is the date you must own the shares in order to receive the distribution, he added.
You can also look at your portfolio holistically and see if there is any tax loss harvesting that can be done elsewhere, which offsets any profits made this year with losses.”
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