Paying taxes on your investments

One important factor to consider before selling an investment is the impact of taxes.

Taxes on investments: Capital gains

If you sell an investment for more than what you bought it for, you’ll pay taxes on the amount of money you make. This type of tax is called “capital gains” tax.

Let’s step through a hypothetical example. Say you originally bought a share of stock for $20 and later sold it for $30. You’d pay taxes on the $10 you made. That $10 is your “capital gain.” ¹

How much do you pay?

The amount you pay in capital gains taxes is affected by how long you own an investment.

In most cases, you may pay higher taxes if you only hold an investment for a year or less. This is something to keep in mind if you plan on trading often.

Short-term capital gains tax

If you own an investment for a year or less, you typically pay taxes on “short-term” capital gains—the same tax rate as your ordinary income.

For example, if you’re single and your taxable income falls between $44,726 and $95,375, your ordinary income tax rate is 22% (based on 2023 tax rates).

That means you’d also pay 22% on the amount of money you earned from selling your investment.²

So 22% of your $10 in profit is $2.20. That’s how much you'd have to pay in tax on the stock you sold.

Long-term capital gains tax

If you own an investment for more than a year, you typically pay taxes on “long-term” capital gains—a rate of 0%, 15%, or 20%, depending on your income.

So if you’re single and your taxable income falls between $44,625 and $492,300, your long-term capital gains rate is 15%.

Anything less, it’s 0%, and anything more, it’s 20%.²

Using our example numbers above, you’d pay just 15% on your $10 in profit, which is $1.50.

State capital gains tax

Many states also have capital gains taxes on top of the federal taxes discussed above, so it’s a good idea to research your state’s rates specifically.

States that don’t charge capital gains tax are Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, and Wyoming.

Do you pay taxes on investments if you don't sell?

You may still have to pay taxes on interest you earned and dividends you received throughout the year, even if you haven’t made any money by selling investments. And states that don’t tax capital gains may still tax interest and dividends, so be sure to learn about your state’s laws.

Talk to a tax professional

If you have questions about your specific tax situation, it’s helpful to talk to a tax pro to get individualized advice. You may find this especially useful when it comes time to file your taxes.

Next steps to consider

Your consolidated 1099 tax form for 2023 will be available in your Plynk app by March 6, 2024.

How to view your form in the app:

• Log in to the Plynk app
• Select the Menu icon and click on Account
• Scroll down to the Activity and Banking section and select Statements and Documents
• Select the Tax Forms tab

For more information, check out our FAQs page.