How will selling my mutual funds affect my tax liability?
I have a mutual fund account that I had to claim $3,000 for in net capital gains this tax year (2017). I am now looking to sell some of my mutual fund shares to get immediate cash. How will this affect my tax liability for 2018? I want to pull out this $3,000 in net capital gains and I don't want to be double taxed on it. How do I avoid that?
The $3,000 net capital gains you refer appear to be capital gains that accrued to the mutual fund from its holdings during 2017. That's different from a $3,000 net capital gain that you would have from your sale of fund shares. Be aware that the fund may well have further capital gains accruing this year, for which you would have tax liability payable in 2019. That's not double taxation. The taxes would be on completely separate gains. One is the gains the fund makes from the sale of its holdings. The other would be on gains you have from the sale of your fund shares.
Your tax liability for a sale of fund shares this year will depend upon several factors. First, what is the gain above the cost basis? Second, for how long have you held the shares. If more than a year, you will be able to take advantage of capital gains rates, which are lower. Third, what is your tax bracket? If you are in the 10% or 15% bracket, no tax will be payable. If your bracket is between 25-35%, the tax rate will be 15%. If your bracket is higher, the capital gains tax rate would be 20%.
Depends on a couple of things, i.e. married vs. single, and your income. If you are married and you have income below $77,200, your cap gains tax will be 0%. If married with income under $479k but more than $77.2k, then tax will be 15%. If married with income over $479k, then tax will be 20%. If single with income under $38,600, then tax will be 0%. If single with income under $435,800 and greater than $38,600, then tax will be 15%. Finally, if single with income over $425,800, then tax will be 20%. These are all figures based on new tax law. If you use the $3k and spend it, you won't have any double taxation except for sales tax in your state. If you reinvest the $3k into another capital asset, this $3k becomes your new cost basis and only the growth of that investment will be taxable sometime in your future. I hope this helps. My best, Ted