Capital Gains

Forum|Forum|4 years ago
June 8, 2022
7 replies
40 views

If I make periodic contributions to my brokerage account and take no withdrawals as it appreciates do I start paying capital gains tax after I withdraw more than the sum of my contributions?

Anonymous_

Level 15

What you described is simply not the way capital gains (or losses) work for the purposes of IRS reporting.

You need to report all sales that occur within your account on your income tax return, which sales will typically be reported to you on a tax reporting statement (such as a 1099-B).

MalikHenryAuthor

Level 2

I pay capital gains as long as the ETF appreciates?

Ex: I contribute $200,000 in an ETF. The value appreciates to $400,000 over time. Then I withdraw $100,000.

I still pay at capital gains even though I am still under my contribution amount?

Anonymous_

Level 15

@MalikHenry wrote:
I still pay at capital gains even though I am still under my contribution amount?

Again, your contribution amount is irrelevant.

However, you will not pay capital gains tax on unrealized gains. Therefore, you would have to actually sell $100,000 worth of the ETF (in your example) before you would even have to report the gain.

AnthonyC_CPA

Level 5

If you contribute to a non-retirement brokerage account and receive dividends you may be required to pay income taxes even if you do not withdraw from the account. Dividends that are reinvested will be taxed in the year received but will increase the cost basis of the security or mutual fund that you purchased and thereby reduce the amount of the gain when you sell the position. When you sell a position in a non-retirement brokerage account you will either have a gain or a loss when you compare the adjusted cost basis to the proceeds of the sale.

Hope this helps answer your question.

AnthonyC_CPA

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