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What First Time Investors Should Know About Tax Time


You have your entire future laid out in front of you, and with proper planning for retirement, you’ll be able to settle down without worrying about finances. Investing in your future early on is a great way to set yourself up for success — but it’s never too late to start. If you’re a new investor heading into your first tax season, you might be wondering what you need to know about your taxes and investments.

We know that tax season can be daunting, and with multiple investments, it can seem even scarier — it doesn’t have to be that way! The team at AA Tax & Accounting Services is here to help you navigate the tax process so you can feel confident in your investments. Here are our top tips for first-time investors for tax time.

Understand Realized Gains

If you’re new to investing, you might not fully comprehend how investments are taxed. Something you need to consider is the realized gains on your investment. If you purchase a stock that sees an increase in value, you won’t be expected to pay taxes on those gains every tax season. You will only be expected to pay taxes when you “realize” the gain when you sell your stock shares.

For example, if you purchase 50 shares of a stock for a cost of $50 but the stock value increases to $75, you won’t be required to pay taxes on the $25 gain until you choose to sell your shares. With any investment, you can expect to see values rise and fall over time. If your stock share goes down in value, it will be a similar situation to realized gains where you won’t face any tax implications until your shares are sold.

Long Term & Short Term Gains

Now that you’re on your way to becoming an investing pro, you must understand the difference between short-term capital gains and long-term capital gains before heading into tax season.

Your investments’ tax implications will vary depending on how long you have held onto that particular stock. This means that your gains will be taxed at the short-term capital gains rate if you sell your shares after only holding them for a year or less. If you have held onto the stock for more than a year, your gains will be tased at the long term capital gains rates. Knowing how long you have held each of your investments can help you determine if selling or holding onto your shares a little longer is the best choice financially.

The tax rate for short-term capital gains is determined by your specific income tax bracket, while long term capital gains tax rates are typically lower than your income rate and not specific to an income bracket.

Offset Income with Capital Losses

If a few of your investments didn’t pay off this year and you have more losses than gains, you can apply up to $3,000 of your investment losses and apply that against your income. Although experiencing a loss on the investment isn’t the goal, applying the loss against your income allows you to reduce your annual income and potentially offset having a higher-taxed income. If your losses are more than $3,000, you can apply that loss to a future tax season as well.

Tax Consulting Services in Cedar City, Utah

As a first time investor, it can be difficult to understand the tax implications of your investments. If you’d like to feel confident in executing the right tax strategies to save you the most money, we recommend consulting certified public accountants like AA Tax & Accounting Services when preparing this year’s tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has unparalleled experience dealing with taxes on investments and can provide effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

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