I'm a New Investor—How Does That Affect My Taxes?

I’m a New Investor—How Does That Affect My Taxes?

February 19, 2020

Starting out in the stock market can be scary. Most people aren’t born or raised with an intimate knowledge of investing—only a vague notion that it’s a smart idea. When tax time rolls around, it can be even more intimidating. How do you know whether you’ll need to pay taxes, and how much? Taxes for investors in Hayward, CA can be confusing, but when you work with a friendly CPA team like Menjivar & Company CPAs, Inc., we can alleviate your concerns and make sure your filings are correct.

Here’s an overview of how investments and taxes work.

Taxable events

When you gain or lose money through your investments, that’s called a “taxable event.” Anytime you have a taxable event, like the sale of stock, you’ll receive forms from the brokerage firm or mutual fund company. The exception is if your accounts are tax-deferred or tax-free accounts, such as a Roth IRA or 401(k):

  • Securities: Selling stocks or mutual funds will result in a capital gain or loss, depending on whether you sold for a profit or loss. These are both considered taxable events, and can be considered either short-term or long-term capital gains or losses. Your gains will be compared to your losses, and if you have a net loss, you can deduct up to $3,000 in taxes against your income. (If your losses were more than that, you can carry over into future years.)
  • Cryptocurrency: Cryptocurrency is treated much the same way as stocks—you will need to pay taxes on any gains and may be able to deduct losses from your taxes. Your accountant or tax software can guide you through this process—all you need to know is that it’s treated as a taxable event.
  • Dividends and interest: Finally, anytime a stock or fund pays you money in the form of dividends and interest, that is considered a taxable event that you must report. Depending on the type of payment, you may choose to either reinvest or accept the cash payment. Your tax liability will depend on the class of payment as well as how much you received and from whom.

If this all seems overwhelming, don’t worry—the key is to save all of your tax forms from your investment firms and take them to your accountant at tax time.

Taxes for investors in Hayward, CA

Whether you’re just starting out or are a seasoned investor, Menjivar & Company CPAs, Inc. can assist you with all your tax preparation needs. We stay on top of tax code changes and are skilled at finding deductions for our clients, so you never have to worry about an audit from the IRS. We’ll do our best to maximize your refund while reducing your tax burden, leaving you even more money to invest. Menjivar & Company CPAs, Inc. works with a variety of clients, from individuals to corporations. We can help you, too—call us today to find out how our tax services can benefit your home or business.

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