Taxes take a large bite out of taxable mutual funds. Recent tax-break laws will end in 2010 and it would be smart for taxable mutual fund investors to keep an eye on one of the main drags on their performance: taxes. One key reason why mutual funds paid out such hefty taxable distributions in recent years is because they can no longer carry forward the steep losses incurred during the 2000-2002 bear market, which had been used to offset gains in recent years.
The estimated taxes paid by taxable mutual fund (MF) investors increased 42 percent from those paid in 2006, and buy-and-hold taxable MF holders surrendered a record-setting $33.8 billion in taxes to the government, surpassing 2000's record amount of $31.3 billion!
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