Switching mutual funds can bring a tax surprise

Many mutual fund companies allow you to switch funds without a penalty or commission, as long as you stay within their family of funds. There's a catch though.

Unless the funds are in a tax-deferred retirement account, you could owe income tax each time you make a switch. When you move money between funds, the IRS considers it a sale. You've sold shares in the first fund, then reinvested the proceeds in the second. As a result, you'll owe income tax on any gain.

You should consider switching funds when it makes economic sense to do so. Just don't forget that Uncle Sam may have his hand out at tax time.

To discuss the tax implications before making a switch, give us a call.

DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here.  All rights reserved.