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I am looking at cashing in about 30K in mutual funds (non IRA), looking to pay off my house. Are there "rule of thumb" estimates/percentages on what I will have to in taxes? Most of the funds were bought in the 80 or 90s. I understand the IRS allows different methods for calculating the taxes on the sale.

If I proceed is there a recommended method for averaging the profit/capital gains etc?

Probably paid about 2K. So, still interested in having original question answered. Thanks.

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    The 80's or 90's are a 20 year span. Do you not know your cost for these funds?
    – JTP - Apologise to Monica ♦
    Commented Oct 21, 2015 at 20:21
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    $30k sales might have originally cost you $22k, or $2k; the only way to find out is to look it up, and the profit is what you get taxed on. Check your records, and/or ask the fund managers to check theirs.
    – keshlam
    Commented Oct 21, 2015 at 21:26
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    Actually, the cost (or basis) in the funds is not just the initial investment, or the initial investment plus all new monies put in (e.g. from savings from paychecks) but also any distributions from these funds that were re-invested in the funds. Ignoring this last (easy to do for those not paying attention) will mean double taxation of these distributions, once when the distributions were originally made and again upon withdrawal from the funds.
    – Dilip Sarwate
    Commented Oct 21, 2015 at 21:46
  • @DilipSarwate Yes, that was sloppiness on my part, plus I got another part wrong too so I just deleted the comment being it wouldn't let me edit it.
    – blm
    Commented Oct 21, 2015 at 21:53
  • How much did you spend on the shares? How much is re-invested distributions that would be added to the cost basis? That would determine how much money has been spent to acquire the shares you have.
    – JB King
    Commented Oct 22, 2015 at 0:00

2 Answers 2

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Straight from the horse's mouth,

The tax rate on most net capital gain is no higher than 15% for most taxpayers. Some or all net capital gain may be taxed at 0% if you are in the 10% or 15% ordinary income tax brackets. However, a 20% rate on net capital gain applies in tax years 2013 and later to the extent that a taxpayer’s taxable income exceeds the thresholds set for the new 39.6% ordinary tax rate ($406,750 for single; $457,600 for married filing jointly or qualifying widow(er); $432,200 for head of household, and $228,800 for married filing separately).

Even if you paid $2000, you must account for the reinvested dividends, if any, which add to your basis. So you're looking at less than $4500 tax, probably.

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  • The $4500 (15% of $30K) suggests that you are assuming that the basis is $0; the less than suggests that you are assuming the basis is nonzero. It would indeed be unusual for a mutual fund to have no distributions of any kind over a span of 20-30 years or to have grown from $2K to $30K over that span of time without reinvesting the distributions.
    – Dilip Sarwate
    Commented Oct 24, 2015 at 17:06
  • The 20% potential rate is a curve ball. 20 years of low, say 2% dividends, raises his basis to $3000 or so. 20% of a 27,000 gain is still $5400. 15% is $4050, or he may be subject to zero or 10%. Yes, I "less than"ed and probablied to just offer a range. OP needs to read the paragraph from the IRS and see where he lands.
    – JTP - Apologise to Monica ♦
    Commented Oct 24, 2015 at 19:18
  • A $2K investment that grows to $30K in 20 years has a CAGR of nearly 14.5%, and if a mutual fund has indeed exhibited that rate of growth for 20 years, it would be advertising it to the high heavens. I think the OP needs to find his records and go through them looking for re-investments of distributions; he will likely save a bundle on taxes.
    – Dilip Sarwate
    Commented Oct 24, 2015 at 21:59
  • agreed, but OP said 80s/90s, and 35 years would result in an 8.04% return. See moneychimp, 1988 gives us a 15 fold return. So late 80's is about right.
    – JTP - Apologise to Monica ♦
    Commented Oct 24, 2015 at 22:07
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"what should I expect for my taxes?" -- -infinity to $30000. You could have bought the funds for one billion dollars, you could have bought them for one cent.

"Are there "rule of thumb" estimates/percentages on what I will have to in taxes?" -- No.

"If I proceed is there a recommended method for averaging the profit/capital gains etc?" -- "averaging" what?

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  • Infinity? Even if purchased for one billion, that's 999,997,000 in carryover losses :)
    – user662852
    Commented Oct 22, 2015 at 0:28
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    Good luck having that much in gains to offset those losses and realize a savings.
    – JohnFx ♦
    Commented Oct 22, 2015 at 2:04
  • @user662852: If you look closely, there is a minus sign in front of "infinity"!
    – Nate Eldredge
    Commented Oct 23, 2015 at 19:59
  • Thanks everyone! I obviously need to do a little homework. The post on the taxes being about 10 to 20 % is very helpful. Gets me started.
    – WCO
    Commented Oct 25, 2015 at 23:40

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