LAS VEGAS — As 2025 winds down, many investors are bracing for year-end mutual fund distributions, which can trigger a hefty tax bill for assets held in a taxable brokerage account. But there are strategies to avoid the payout, experts say.
For 2025, “you’ve got some pretty eye-watering numbers,” with some funds planning to distribute double-digit capital gains, said Brandon Clark, director of exchange-traded funds for asset management firm Federated Hermes.
After another strong year for the stock market, more than 10 mutual funds are estimating payouts of at least 25%, with most distributions expected to come around late November through year-end, according to a Morningstar report published on Monday.
If you own these mutual funds in a brokerage account, you could pay taxes on the capital gains payouts, even when you reinvest the proceeds. Those reinvested gains lower your “basis,” or the asset’s original purchase price, which can help reduce future profits.
Still, “the ETF solves a lot of those [yearly tax] problems,” said Clark, speaking at the Financial Planning Association’s annual conference on Tuesday.
