Tax season brings new confusion to many investors, but with the right tax help, filing can be simple. ZP Tax in Silver Spring, MD, can help reduce the stress of filing taxes and make the process as simple as possible, even for clients juggling large amounts of investments.
When it comes to filing income taxes, your investments will affect the amount of income you earned. Here are a few things you should know about how taxes affect your stock investments prior to meeting with a tax professional:
Taxes Are Owed on Dividends Paid
As a stockholder, you’re entitled to dividends based on the number of shares you own. These dividend payments count towards your overall income earned that year, and thus, count towards the amount owed for income tax. The actual amount of tax you pay on the dividends will depend on your tax bracket and will vary from individual to individual.
You Must Pay Tax on Sold Shares
Taxes owed on sold shares of stock will vary based on the length of time you’ve owned the shares. If you’ve held the stock for less than a year and sold the shares for a profit, the amount counts towards your total income for the year. For these shares, you’ll have to pay regular income tax on the profit based on your income tax bracket.
If you’ve owned shares for more than a year and sold them for a profit, the gains are treated as long-term capital gains. For most individuals, these profits are taxed at a rate of 15%, though your tax preparation expert will be able to identify the exact percentage you’re responsible for.
When you schedule an appointment for tax help with an experienced advisor, be prepared to discuss losses you incurred from any stock sold throughout the year. These losses may help offset the total amount of capital gains earned by other shares.
Retirement Accounts Have Different Rules
Some stockholders invest their shares to grow their retirement funds. Many contributions to these funds are done on a pre-tax basis and may reduce the amount of income tax you’re obligated to pay. Keep in mind that any early distributions from these accounts will incur an additional 10% fee if you’re under the age of 59 and a half. Be prepared to discuss any early withdrawals and contributions when you schedule an income tax prep appointment.
This tax season, get the tax help you need and schedule an appointment with an experienced tax preparation professional at ZP Tax. For more information on their services, visit their website or call them at (301) 587-4829.