Oh, it’s tax season: the most boring time of year. But we here at Bold TV know that preparing your taxes can be confusing. Do I pay taxes on unemployment? Stocks? Crypto? A 401(k)? Here’s a breakdown of taxable income. Don’t stress!
Do I pay taxes on my stocks?
First, let’s talk about the stock market. Maybe you invested in GameStop in the past few months and cashed out just in time to make some money. Eventually, you will have to pay taxes on that but not right now. Next year, you will pay what’s called a “short-term capital gains tax” — a tax on profits from selling an asset that you held for a year or less. Now, if you held on to that stock for more than a year before you sold it, then you would pay a “long-term capital gains tax,” and the rate could be as low as 0%, depending on your taxable income and filing status. Remember, if you hold on to your stock, you won’t have to pay any taxes because you haven’t made any money. But if you collect dividends — a cash payment — from a stock given to shareholders by the company, you have to pay taxes.
Do I pay taxes on my crypto?
And let’s talk about the next thing: Is crypto taxable? Yes. In fact, the IRS is cracking down on crypto tax compliance. If you trade crypto for money or another coin, use it to buy something or earn it as a payment, you will be taxed. If you sell or trade your crypto investment, it gets taxed like a stock through capital gains tax. But if you get paid in crypto or mined Bitcoin, you pay income taxes on the dollar value of your crypto earnings. The only time you are taxed on crypto is when you buy it and hold onto it. So, if you want to lower your tax bill, consider holding onto your investments and selling them at a later time.
Do I pay taxes on my unemployment?
Many people had to collect unemployment for the first time last year, and the tax process may be extra confusing. You have to pay federal income taxes on your unemployment benefits, as well as any local and state income taxes. Make sure you watch our previous video on state taxes to figure out how much you have to pay in your state. Thankfully, our stimulus checks aren’t taxed.
Do I pay taxes on my retirement plan?
Finally, let’s talk about taxes on retirement plans. When you pay into a 401(k), it’s usually called “pre-tax dollars,” which reduces the income tax you pay. But when you withdraw from your 401(k) and taxes hit, you’ll pay for that. The IRS taxes it just like regular income based on your tax bracket. And the same goes for a traditional IRA.
Check out the video for more information on taxable income. In the meantime, happy Tax Day!
