When it comes to filing your taxes, basic elements like revenue and costs are not the only things you have to consider. Indeed, you must account for your investments over the past year and any income you made off those investments.
Accurately filing investment taxes can be challenging, so we recommend seeking professional help to ensure you file everything correctly. We will discuss how we can help you with this, but first, let’s discuss the types of investment taxes you should keep in mind. The following are three of the most common types of investment taxes and a brief overview of how they could affect your yearly taxes:
Dividend Taxes:
If you receive dividends on your investments in the stock market, you have to pay taxes on those dividends because the government considers this as income. And even if you reinvest the earnings from your dividends, you still have to report it in your taxes. At the end of the year, you will receive a 1099-DIV form from your broker that will tell you how much you owe.
Capital Gains Taxes:
“Capital gains” refers to any profit you make from the sale of an asset such as a business, land you may own, a share of stock, or more. You must pay taxes on this profit, as this is considered income. However, if you sell an asset for a profit, but you sell another asset at a loss, you can deduct that loss from your total profit.
For example, if you sell one piece of land at a $100,000 profit (meaning you sell it for $100,000 more than what you paid for it), but you sell another piece of land at a $20,000 loss (meaning you sell it for $20,000 less than what you paid for it), you would only have to pay taxes on an $80,000 profit. Deducting your losses from your total profits is called “Tax-Loss Harvesting.”
Home Sale Taxes:
If you sell your home and make a profit, you must pay taxes on that profit — to an extent. We say “to an extent” because the government allows you to deduct a good portion of your home sale profit from your taxes.
Generally, if you are single, you can deduct up to $250,000 of profit, while if you’re married, you can deduct up to $500,000. For example, if you and your spouse buy a home for $300,000 and later sell it for $900,000, you would have a $600,000 profit. However, after deducting $500,000, you would only have to pay taxes on a $100,000 gain.
Please note that the exact amount you can deduct may depend on your unique situation, so we recommend consulting a tax professional to ensure you save as much money as you can.
Get Professional Help For Your Investment Taxes:
If you need experienced and trustworthy tax consultants, please do not hesitate to reach out. We would be more than happy to speak with you about how we can help with your taxes and make your life easier. Krowne Certified Public Accountants offers unparalleled financial guidance and professional services specifically tailored to our client’s needs.
Please feel free to reach out to us by filling out the form on our contact us page or via phone at 818-831-6075. We would love to discuss your situation and help you grow. We look forward to hearing from you.
