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CaptainJ
New Member

Question about Transfer of Mutual Funds

I have considerable funds that are currently invested in a mutual fund, but I would like to transfer them to an index fund in order to take advantage of lower fees and better performance. However, as this money has been in my mutual fund for several years, I am worried that the transfer might trigger a large capital gains tax. Is there any way for me to make the transfer without having to paying the capital gains tax (until I decide to actually sell and collect the profits)?
2 Replies
Critter
Level 15

Question about Transfer of Mutual Funds

Sorry but that is a sale and you pay cap gains no matter what the profits are used to purchase. 

jtax
Level 9

Question about Transfer of Mutual Funds

If the mutual funds are held in an IRA or 401k or the like there will be no tax until withdrawn. Selling a fund and buying another one is not a withdrawal.

 

If, however, they are in a regular taxable account, then yes you will have to pay capital gains. However capital gains rates have never every been lower. Some people even have a zero percent rate! See e.g., https://www.thebalance.com/how-to-use-the-zero-percent-tax-rate-on-capital-gains-2388995

 

Moving to index funds is a very good idea. (IMHO)

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