Reporting Stock Investments on Your Tax Return: A Step-by-Step Guide

Did you make your first stock purchase in 2020? First and foremost, congrats! One of the most effective strategies to increase your net worth is to invest in the stock market. You are essentially putting your money to work for you when you invest in stocks. You can earn interest and dividends on your money if you invest it. You can make hundreds of dollars in return over time!

While owning stocks and other investments is beneficial, it can also make your tax situation more complicated. Your investments and stocks must be mentioned on your tax return. You may be required to pay taxes on interest, dividends, or stock sales.

Overwhelmed? Don’t be that way. We’re here to assist you. Here’s everything you need to know about filing a tax return with stocks and investments.

If you buy or sell investments, you will have to pay taxes.

You may have to pay taxes on any capital gains if you sold part of your interests in 2020. Profits from investments are referred to as capital gains. The math is straightforward: capital gains = buy price – selling price.

The amount of taxes you owe will be determined by a number of things. Short-term and long-term holdings are the two types of capital gains. A short-term holding is one you had for less than a year, and it can be taxed up to 37 percent depending on your income. Long-term investments, on the other hand, are those that you hold for more than a year. Long-term investments are also taxed based on your income, with tax rates ranging from 20% to 15% to even 0%.

Interest and Dividend Taxes

This year, you didn’t sell any of your investments? While capital gains will be tax-free, dividends and interest will very certainly be taxed.

Companies may pay you dividends if you own stocks or index funds on a regular basis. Similarly, if you receive interest on bonds, you must record it and most likely pay taxes on it.

How to File a Tax Return with Stocks and Investments

Starting to invest can make your tax situation more complicated, but don’t be concerned. Equity Taxation is here to guide you through all of the additional paperwork you’ll need this year to report stocks and investments on your tax return.

To begin, assemble all of the forms and documents you’ve received. This could include 1099-DIV forms, which detail the amount of dividends you received from each company. You might also get a 1099-B form, which shows any capital gains you made during the course of the year.

After then, it’s time to file your taxes. Equity Taxation will guide you through the process of filing your taxes and offer you with the assistance you need to report the data correctly. A $100k Accuracy Guarantee is offered by Equity Taxation.

therefore you can be sure they’ll do everything possible to get you the most money back

Looking Towards the Future

You may be tempted to tuck all of your information away and ignore your investments now that your taxes have been filed.

This is, however, an excellent time to get your ducks in a row for the following year. Consider what you owed on your investments  if there are any It’s very likely that your taxes will rise if you continue to invest. Consider a tax-free investment vehicle, such as a 401(k), Roth IRA, ordinary IRA, or a health savings account, to avoid paying even more taxes.