New legislation recently introduced in both the Senate and the House could help millions of Americans save more money on their mutual fund investments.
The Generate Retirement Ownership Through Long-Term Holding (GROWTH) Act would allow those who invest in mutual funds to defer capital gains taxes on any growth in the funds.
Currently, when mutual funds distribute capital gains to investors, taxes must be paid on them, even if an investor reinvests those gains.
The legislation stands to potentially save money for tens of millions of people, as 53.7% of U.S. households owned mutual funds as of 2024.
U.S. households have about $7 trillion of long-term mutual fund assets in nonretirement accounts, according to the Investment Company Institute, which supports the measure.
Sen. John Cornyn (R-Texas), who introduced the bill in the Senate, said in an anouncement that the new legislation would help investors keep their money working longer:
“Deferring taxes on reinvested mutual fund capital gains distributions until the investor sells their shares is a no-brainer and would help provide parity with other investment options.”
However, don’t get too excited about the GROWTH Act’s prospects of becoming law. Despite the fact that Republicans now have control of the presidency, House and Senate, there hasn’t been much movement on the legislation to date.
After being introduced, both bills were sent immediately to committees, with the Senate version sent to committee in May after the House version did so in March. But since that time, there have been no votes on the legislation.
To become law, the act must first pass committee before passing both the full House and Senate and reaching the desk of President Donald Trump, who would then have to sign it.
The GROWTH Act also has a history that is not encouraging. It’s been introduced in Congress before — as far back as at least 2005, when the legislation stalled in committee. Technically, this doesn’t bode well for the bill’s odds of success this time around.
However, if you invest in mutual funds and love the idea of deferring taxes on reinvested capital gains — or if you think the legislation is a bad idea — you can contact your elected officials in the Senate and House and let them know how you feel about the current bill.
For more tips on growing the size of your nest egg, check out “7 Easy Ways to Start Building Your Retirement Savings Today.”
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