Despite stock market losses investors may get year-end mutual fund payouts. That can trigger a surprise tax bill.

Despite stock market losses investors may get year-end mutual fund payouts. That can trigger a surprise tax bill.

Despite stock market losses investors may get year-end mutual fund payouts. That can trigger a surprise tax bill.

Summary : Despite stock market losses, investors may get year-end mutual fund payouts.

After a rough year for the stock market, investors may not expect to receive a surprise tax bill from year-end actively managed mutual fund payouts, experts say.

As a result, some investors may see year-end mutual fund distributions, despite stock market losses in 2022, the report found.

Lucas said mutual fund payouts often “slip under the radar” and need to be included as part of an investor’s year-end tax planning.

After a rough year for the stock market, investors may not expect to receive a surprise tax bill from year-end actively managed mutual fund payouts , experts say.When a fund manager sells underlying assets at a profit without losses to offset it, those gains are passed along to investors . The profits are taxable to investors when received in a brokerage account.While the S&P 500 is down more than 20% for 2022, many funds started the year with previously embedded gains, according to Morningstar. And some fund managers sold profitable underlying assets as money has continued shifting from active to passively managed funds.

As a result, some investors may see year-end mutual fund distributions , despite stock market losses in 2022, the report found.

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“It’s a double whammy,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.While you’ll owe long-term capital gains taxes of 0%, 15% or 20% for assets held for more than one year, you may also owe regular income taxes for investments owned for less than one year.Lucas said mutual fund payouts often “slip under the radar” and need to be included as part of an investor’s year-end tax planning.