First-time investors, retirement savers, and meme stock enthusiasts alike love Robinhood, the commission-free investment and trading platform.
But easy investing doesn’t mean an easy tax filing process — especially because taxes on securities involve lots of nuances (and forms) that you don’t have to think about with other types of income.
Are you a Robinhood user dreading tax season? Understandable. We’re here to help.
Do you have to pay taxes on Robinhood income?
Yes, there’s a good chance you’ll have to pay taxes on your Robinhood income. Any income you earn from selling securities or cryptocurrency is treated as regular income in the eyes of the IRS. That means you’ll be on the hook for taxes if you earn $400 or more in profit.
To get an idea of how much you’ll owe, check out Keeper’s 1099 tax calculator.
When do proceeds from selling stocks count as income?
Any time you make an initial sale on Robinhood, your earnings count as income — even if you immediately reinvest them.
Let’s take a step back. What exactly constitutes a “transaction” can be confusing on an app like Robinhood, where you might not pocket your proceeds after completing a sale within the app. Do you still have to pay taxes on the initial sale?
Yes. It’s important to remember that even if you don’t transfer your Robinhood income into a regular bank account — even if you reinvest that income — your initial sale still counts as a “taxable event.”
What taxes do you have to pay on your Robinhood income?
When you sell a security on Robinhood, you’ll likely need to pay capital gains tax on your profits.
What is capital gains tax?
Capital gains tax is a tax on any profit you make on the sale of a capital asset, which the IRS describes as “almost everything you own and use for personal or investment purposes.” This could be:
- A concert ticket
- A piece of jewelry
- An NFT
- Shares of stock
- An autographed baseball
How much you’ll be taxed depends on your federal income tax bracket and whether you have a short-term or a long-term capital gain.
Long-term vs. short-term capital gains
The amount of capital gains tax you’ll have to pay depends on how long you owned your asset before you sold it:
- Short-term: You’ve owned the asset for less than one year. In this case, you’ll be taxed at your normal income tax rate
- Long-term: You’ve owned the asset for more than one year. For 2023, you’ll be taxed at a rate of 0%, 15%, or 20%, depending on your long-term capital gains rate (This is different from your normal income tax rate)
It’s rare for long-term capital gains to be taxed at more than 15%, though.
Do you have to pay taxes if you lose money on Robinhood?
No. If you lose money when you sell a stock — that is, you sell it for less than you paid for it — you haven’t incurred a capital gain. Instead, you have incurred a capital loss.
Luckily, you can write off a capital loss on your taxes, which should help soften the blow. More on that later!
Do you have to pay taxes on cryptocurrency transactions?
Yes, you do have to pay taxes on income you earned by selling cryptocurrency. According to the IRS, transactions involving a “digital asset” — a category that includes crypto, stablecoins, NFTs, and more — are taxable.
If you use Robinhood for both crypto and securities, you’ll receive tax forms for both accounts in a single PDF starting in 2023. This is a change from previous years.
What forms do you need for your Robinhood taxes?
It is very likely that Robinhood will send you one or more 1099 forms containing information about your transactions from the last tax year. According to the Help Center section of Robinhood’s website, you won’t receive a tax document only if you meet all of the following criteria:
- You “received less than $10 in dividends or interest”
- You “didn’t sell any stocks, crypto, ETFs, or options”
- You “received less than $600 in miscellaneous income”
Unlike traditional gig work platforms, Robinhood won’t send you a 1099-K and call it a day. Instead, you’ll probably receive a consolidated 1099, which includes information from multiple types of 1099 form. (If you traded both crypto and securities, info for both will be on the same consolidated form, which is a change from previous years!) Some of these are:
- Form 1099-DIV
- Form 1099-B
- Form 1099-MISC
This form reports your income from dividends and distributions.
This form reports broker transactions, including the sale of stocks, bonds, crypto, and other securities. The data from Form 1099-B will help you fill out your Schedule D (Capital Gains and Losses) and Form 8949.
This form reports any miscellaneous income throughout the year. This might include gift stock from Robinhood’s referral program.
When will you receive your consolidated 1099?
According to the Robinhood website, consolidated 1099 forms will be available for users on February 15. This date is different from the deadline for simple 1099s, which is January 31.
What about Form 1099-R?
Form 1099-R reports distributions you might receive from an IRA, or individual retirement account, throughout the year. It will not be reflected on your consolidated 1099; instead, you’ll receive it separately by January 31.
What if you don’t get a 1099 form?
Robinhood cautions users to wait until February 18 to receive their consolidated 1099 form, partially because they might have to issue corrections to the initial form.
If that date has come and gone, but you’re otherwise ready to file, you don’t necessarily have to wait around for your missing forms. You can find the information you’ll need in other places, including in your Robinhood account settings. (Robinhood provides step-by-step instructions on how to download account activity reports in the support section of its website.)
How to file your Robinhood taxes
All right, it’s filing time and you’ve got all your forms from Robinhood (or you’ve figured out how to get that info elsewhere). What you need to do next depends on whether or not you’re self-employed as a day trader in securities — though no matter which category you fall into, Keeper can file your Robinhood taxes for you!
How do you know if you’re self-employed as a trader in securities?
Amazing question. According to the IRS, trading securities is considered “to be a business, even though a trader doesn’t maintain an inventory and doesn’t have customers.” To figure out if that’s you, you’ll need to meet all of the following criteria:
- “You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation” — that is, you frequently engage in day trading
- “Your activity must be substantial” — that is, you trade a lot and in significant amounts
- “You must carry on the activity with continuity and regularity” — that is, you treat it like a job
These guidelines admittedly leave some room for interpretation. Karla Dennis, an Enrolled Agent and the founder of Karla Dennis & Associates, frames it in terms of what a trader is not: a long-term investor. “An investor invests for the long term, does not frequently take profit, and typically will have another source of income to sustain their living expenditures,” she says.
In other words, if you’re buying and selling securities day-to-day instead of buying them to hold, you’re likely to be a day trader in the IRS’s eyes.
For non-day-traders: Report your Robinhood income on Schedule D and fill out Form 8949
Here’s how to fill out Form 8949 (Sales and Other Dispositions of Capital Assets). Note that there are separate sections for short-term and long-term capital gains.
In column (d), you’ll enter the sale price of your stock, and in column (e), you’ll enter the amount you paid for the stock initially. The difference between the two goes in (h). That’s your gain.
You’ll also report that gain on Schedule D (Capital Gains and Losses) using one of the following lines: (1b), (2), or (3). The line you pick depends on whether you checked box A, B, or C on Form 8949.
You’ll check A if the IRS is already aware of how much you paid for your stocks. (If you bought and sold the security on Robinhood, it likely is.) You’ll check B if the IRS is not aware of how much you paid, but you did receive a 1099 from Robinhood. Finally, you’ll check C if you did not receive a 1099 at all.
Below is Part I of Schedule D:
For day traders: Fill out your Schedule C
If you’re self-employed as a trader, you’ll report your earnings on Form Schedule C.
Part I of the form is for reporting your “gross receipts or sales,” which is basically your income before you claim any deductions. Part II of the form is for recording your deductions, which will lower the income you’ll actually be taxed on — and lower the amount you owe.
If you’re stuck, Keeper has a comprehensive guide to Schedule C to help you along the way. And on the app, you can track your expenses to make the filing process even easier. It’ll even fill out Schedule C for you.
The following steps are optional depending on the types of income you received on Robinhood. Complete the ones that apply to you, and feel free to skip those that don’t.
Did you receive Form 1099-MISC?
If you received Form 1099-MISC from Robinhood as part of your consolidated 1099 form, you’ll need to report that miscellaneous income. If you’re a self-employed trader, you’ll report it on Schedule C. If you’re not a self-employed trader, you’ll report it on Schedule 1, line 8j.
Did you receive income from dividends?
If you received Form 1099-DIV — or you know you received dividends — you’ll report this right on Form 1040.
IRS guidelines state that you should copy the amount you see on box 1a of your 1099-DIV into line 3b of Form 1040. These are your ordinary dividends: payments that a publicly traded company makes periodically to the owners of its common stock.
You might also have a number in box 1b of your 1099-DIV. If you do, you should copy that number into line 3a of Form 1040. These are your qualified dividends. (A dividend becomes qualified when you’ve held the related stock for a certain period of time.)
Do Robinhood users have to pay quarterly taxes?
Maybe. If you’re self-employed as a trader and expect to owe $1,000 or more in taxes for the year, you are required to pay quarterly taxes.
Not sure how much you’ll owe? You can get an idea by using Keeper’s estimated quarterly tax calculator.
If you do have to pay quarterly taxes, they’ll be due four times per year, on the following dates:
- April 15
- July 15
- October 15
- January 15 of the following year
How to lower your Robinhood taxes with deductions
You don’t necessarily need to pay taxes on the full amount of your Robinhood earnings. There are a few ways you can lower your taxable income, including deducting capital losses and — if you’re a day trader — writing off business expenses.
How to write off capital losses
Let’s say that, in a given year, you sold some securities for a profit and some for a loss. In this case, you can use your capital losses to offset your capital gains.
Offsetting short-term gains with a short-term loss
Here’s an example involving two short-term sales. If you sold your shares of Stock A for a gain of $500, but sold your shares of Stock B for a loss of $300, then you’ll only pay capital gains tax on $200, the difference between the two.
Offsetting long-term gains with a short-term loss
If you sold your shares of Stock A for a gain of $500, but sold your shares of Stock B for a loss of $1000 — thus leaving you with a net short-term loss of $500 — you can use that loss to offset any long-term capital gains you might have.
Offsetting other income with a capital loss
If you don’t have any capital gains that can be offset by your capital loss, you can deduct a capital loss of up to $3,000 to offset your ordinary income — that is, your income from W-2 wages, other side hustles, and more.
You’ll report your capital losses on the same forms you use for capital gains: Form 8949 and Schedule D.
How to write off Robinhood business expenses
Self-employed traders who plan to fill out Schedule C can also deduct business expenses. The deductions for traders are pretty limited compared to other professions — after all, you don’t have inventory, orders, or customers. But you do have a few options.
- 🌐 Internet bill: Get work done online? You can write off the business-use percentage of your Wi-Fi bill
- 🏠 Home office: Have a dedicated workspace for trading? That’s a write-off. Find out whether this write-off is for you with Keeper’s home office deduction quiz
- 📱 Phone bill: If you use your cell phone for work (yes, including on an app!), you can write off the business-use percentage of your phone bill
- 💻 Computer: If you trade on a laptop or desktop, it might be eligible for deduction as well
- 📓 Education: Take a class on trading or finance? If it’s related to your work as a trader, it could be a write-off
- 🚗 Car expenses: If used “to go meet with other traders or attend conferences,” some of your vehicle-related expenses are deductible, too, says Dennis, the Enrolled Agent
- 💽 Software: Financial analysis or research subscriptions, Bloomberg Terminal, etc.
Remember, you can track your deductions — including capital losses and business expenses — right on the Keeper app. When it’s time to file, we’ll help you fill out your forms and send your return to the IRS. You’ll even have a tax assistant available to answer any questions.
Now that’s a good investment.
Over 1M freelancers trust Keeper with their taxes
Over 1M freelancers trust Keeper with their taxes
Over 1M freelancers trust Keeper with their taxes
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At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email firstname.lastname@example.org with your questions.