If you own mutual funds, year-end payouts can trigger a surprise tax bill — even when you haven’t sold the underlying investment. But some lawmakers want to change that.

Sen. John Cornyn, R-Texas, this week introduced a bill, known as the Generate Retirement Ownership Through Long-Term Holding, or GROWTH, Act. If enacted, the bill would defer reinvested mutual fund capital gains taxes until investors sell their shares.

Bipartisan House lawmakers introduced a similar bill in March.

When you own mutual funds in a pre-tax 401(k) or individual retirement account, growth is tax-deferred. But if you hold assets in a brokerage account, capital gains distributions and dividends incur yearly taxes.

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Depending on performance, some mutual funds can spit off substantial gains during the fourth quarter. In 2024, some paid double-digit distributions, Morningstar estimated.

These payouts are subject to long-term capital gains taxes of 0%, 15% or 20%, depending on your taxable income. Some higher earners also pay an extra 3.8% surcharge on investment earnings.

About $7 trillion of long-term mutual fund assets held outside of retirement accounts could be impacted by the legislation, according to the Investment Company Institute, which represents the asset management industry.

In a statement Wednesday, Cornyn described the mutual fund proposal as a “no-brainer” that would “help provide parity with other investment options.”

If enacted, the proposal would “incentivize Americans to save and invest for their long-term goals” without the stress of an “unexpected tax bill,” Eric Pan, president and CEO of the Investment Company Institute, said in a statement following the bill’s introduction.

However, it’s unclear whether the bill will advance amid competing priorities. Lawmakers are wrestling over President Donald Trump‘s multi-trillion-dollar tax and spending package, which passed in the House on Thursday, and could face hurdles in the Senate.

The U.S. Department of the Treasury has also asked Congress to raise the debt ceiling before August to avert a government shutdown.

You can avoid mutual fund payouts by switching to similar exchange-traded funds, or ETFs, which typically disburse less income, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC.

Of course, the trade could also trigger taxes if the mutual fund has embedded gains, which may require some planning, he said.

Alternatively, investors could opt to keep mutual funds in tax-deferred accounts, such as pre-tax 401(k)s or IRAs.

The multitrillion-dollar tax and spending package passed by the House of Representatives on Thursday includes historic spending cuts to Medicaid health coverage and the Supplemental Nutrition Assistance Program, or SNAP.

Now, it is up to the Senate to consider the changes — and to perhaps propose its own.

As it stands, the legislation — called the “One Big Beautiful Bill Act” — would slash Medicaid spending by roughly $700 billion and SNAP, formerly known as food stamps, by about $300 billion.

“Bottom line is, a lot of people will lose benefits, including people who are entitled to these benefits and who are not the target population of this bill,” said Jennifer Wagner, director of Medicaid eligibility enrollment at the Center on Budget and Policy Priorities.

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The cuts to Medicaid and SNAP — the largest in the programs’ histories — come as the reconciliation bill would add roughly $3 trillion to the nation’s debt including interest over the next decade, estimates the Committee for a Responsible Federal Budget.

To help pay for a variety of tax perks included in the bill, House Republicans have targeted Medicaid and SNAP for savings.

“We don’t want any waste, fraud or abuse,” President Donald Trump said Tuesday on Newsmax when asked about prospective Medicaid changes. “Other than that, we’re leaving it.”

Likewise, some Republican leaders have pointed to rooting out abuse of SNAP benefits.

One way House Republicans are seeking to curb the programs’ spending is through new work requirements.

Notably, the proposal also calls for states to conduct more frequent eligibility redeterminations for adults who are eligible for Medicaid through Affordable Care Act expansions. Starting Dec. 31, 2026, states will be required to conduct redeterminations every six months, compared to current requirements that require eligibility reviews within 12 months of changes in a beneficiary’s circumstances, according to KFF.

The increased frequency of the redeterminations are “likely to have a big impact,” Tolbert said.

Ultimately, the work requirements may make it difficult for people to access the health coverage they need, she said.

“What this may end up doing is having the opposite of the intended effect,” Tolbert said. “They may lose access to the very treatments and services that are enabling them to work.”

The proposal would extend those requirements to individuals ages 55 to 64, as well as households with children, unless they are under age seven. In addition, states would also be limited in the flexibility they may provide with waivers of the work requirements or discretionary exemptions, according to the Urban Institute.

In addition, federal funding cuts would make it so states would have to contribute more toward benefits and administration of the program.

Ultimately, those changes could take away food assistance for millions, according to the Center on Budget and Policy Priorities.

The multitrillion-dollar tax and spending package House Republican passed on Thursday contains a multitude of changes that may affect consumers’ finances.

But the “One Big Beautiful Bill Act” is missing something health care advocates hoped to see: an extension of the premium tax credits under the enhanced Affordable Care Act that are set to expire at the end of the year. The credits’ absence is notable when the bill includes other proposed changes to the ACA marketplace, experts say.

The ACA’s enhanced premium credits help make health insurance policies through the marketplace more affordable. Eligible applicants can use the credit to lower insurance premium costs upfront or claim the tax break when filing their return. 

Instead of a lower-income person paying 2% of their income on their premium, they pay nothing, according to KFF. Higher income people, who were originally ineligible for credits, currently pay no more than 8.5% of their income on their premium.

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Without the extension, nearly all subsidized ACA enrollees can expect their monthly premiums to rise, said Cynthia Cox, vice president and director of the program on the ACA at KFF.

For example, a family of four making $85,000 would have to pay an additional $313 in premiums for coverage in 2026 and face a $900 increase in their out-of-pocket maximum, according to an April report by the Center on Budget and Policy Priorities.

“Pretty much everyone, almost everybody who’s buying their own health insurance, now would see their costs go up,” Cox said.

Here’s what to know if you buy health insurance through the federal marketplace.

The extended subsidies were passed via the American Rescue Plan Act during the pandemic, and covered plans in 2021 and 2022. The Inflation Reduction Act extended the benefit until the end of 2025. 

The premium tax credits made health insurance purchased through the marketplace much more attractive and affordable for people, Cox said.

Since the extended tax credits have been in place, the enrollment in ACA marketplace grew from 12 million in 2021 to a record 24.2 million in 2025, according to a February report by the Commonwealth Fund. 

But if the benefits expire, “we’re basically back to the same Affordable Care Act that existed the last time Trump was president,” Cox said. 

Researchers at KFF anticipate that between the potential lapse of the credits coupled with the proposals, enrollment could shrink by one-third, leaving about 8 million uninsured in the U.S.

One change that is in the House GOP tax bill would make both the share of income that people pay for premiums after tax credits and the maximum out-of-pocket limit 4.5% higher in 2026 than they would have been without the rule, according to Gideon Lukens, senior fellow at the CBPP. He wrote a report in April about the ACA changes in the House proposal and the absence of the premium tax credits.

Sen. Lisa Murkowski, R-Alaska, has said she supports extending the enhanced subsidies to help people afford premiums. “I think we’re going to need to continue these premium tax credits,” Murkowski said in an interview with the Alaska Beacon in January. 

Sen. Thom Tillis, R-N.C., also expressed interest in extending the premiums in an interview with AxiosPro in March.

Neither Murkowski nor Tillis responded to CNBC for comment.

It’s possible that the ACA premium tax credits could be addressed in a different piece of legislation later in the year, Cox said.

“But at least right now, that’s not in this bill that’s being debated right now,” she said.