Mutual funds may distribute an unexpected tax burden to investors this holiday season, which could prove costly in some cases and complicate financial planning.

Mutual funds that experienced net outflows—often due to mediocre performance—are forced to sell some of their holdings and make distributions to remaining shareholders. For investors holding these funds in taxable accounts, the distributions are subject to capital gains taxes that can be as high as 23.8% for some high net worth individuals. The unexpected tax burden may negatively impact an investor’s tax-adjusted returns and complicate financial planning.

These issues primarily affect actively managed mutual funds that experience greater volatility and fund flow changes rather than passively managed index funds. For instance, as of November 30th, the Alger Small Cap Growth Institutional Fund (ASIRX) plans to distribute a third of its assets on December 16th to shareholders. Passively managed index funds, by comparison, typically only distribute 4% to 5% of their assets on any given year to shareholders.

While distributions are unlikely to be as high as last year, when funds paid out an estimated $633 billion, the types of funds paying out distributions is a bit unusual.

With the Federal Reserve expected to hike interest rates in December, bond funds that have historically been a safe bet are expected to pay out some big distributions. The PIMCO Long-term U.S. Government Fund (PFGAX) will distribute 38.5% of its assets on December 24th, based on its net asset value on November 30th. After rising nearly 25% in 2014, the mutual fund experienced large redemptions in early 2015 amid rate hike concerns.

CapGainsValet projects that 327 funds will distribute over 10%, 34 funds will distribute over 20%, and 20 funds will distribute over 30% of their assets, as of December 6th. So far, these figures cover about 200 of the 214 funds listed in its database.

The best advice to avoid these problems is to purchase index funds in taxable accounts and actively managed funds in retirement accounts. If an investor is already holding a fund in a taxable account, it may make sense to sell the fund and buy it back in a tax-deferred account instead of reinvesting in the fund or taking the cash. Investors should also be aware that the net asset value may experience a drop on the day of the distribution, which is to be expected.

In addition, investors should never buy a fund before it makes a distribution—especially a large distribution. Distributions are based on when the fund purchased the stock and the cost basis at the time, while distributions are distributed equally among shareholders regardless of when they purchased the mutual fund. This means that an investor holding the fund for a few days pays the same taxes as an investor that has held the fund for 10 years.

Investors that insist on using a taxable account for investing in actively managed mutual funds experiencing distributions have several options, including reinvesting, taking the cash or selling the fund before the distribution. Selling may be a good idea if the capital gains on their position is worth less than the distribution in order to minimize their tax bill; however, the investor will still owe tax on the capital gains realized from selling the mutual fund.

Many mutual funds are forced to issue distributions at the end of the year due to fund flow dynamics. With the Federal Reserve’s interest rate hike pending, these distributions have extended into mutual funds that have historically not experienced these issues. Investors should take a closer look at their mutual fund holdings and perhaps restructure their funds in order to minimize their tax exposure in upcoming years.