Below you will find common terms and their definitions:
What is the difference between short-term and long-term capital gain and loss?
When you make a sale of securities, the holding period of the security determines how the sale is classified for tax reporting purposes.
- Short Term Gain/Loss: held for a year or less
- Long-Term Gain Loss: held for longer than one year
Tax rates are applied differently depending on how your sales are classified. In general, you will owe a lower amount of taxes on long-term gains than short-term gains.
What is the difference between a Qualified and an ordinary dividend?
A dividend is considered to be qualified based on the holding period: if you held the stock for more than 60 days out of a 121-day period that begins 60 days before the ex-dividend date. Tax rates are lower on qualified dividends than on ordinary dividends. There are also other factors that make a dividend eligible to be qualified such as:
- The dividend must have been paid by a US company or a qualified foreign company
- The dividend is not listed with the IRS as an unqualifying dividend
How is my Dividend Income reported?
Cumulative dividend income amounting to at least $10.00 is reported on Form 1099-DIV.
- Ordinary dividends are reported in Box 1a
- Qualified dividends are reported in Box 1b
What is Foreign Tax Paid?
Some stocks, such as American Depository Receipts (ADR’s) and Exchange Traded Funds (ETF’s) may be considered overseas investments, due to their country of origin, or portfolio strategy. These securities are subject to foreign tax on income. This tax is deducted directly from the income as it’s received.
How is Foreign Tax Paid Reported?
Foreign Tax Paid is reported on 1099-DIV in Box 7.
What is Public’s Tax Lot Disposition Method for sales?
The default disposition method on sales is set for the MinTax method. This means that if you were to sell a stock, disposition priority would be given to short-term losses over long-term losses, followed by long-term gains over short-term gains. Tax lots are sold based on those that will create the smallest tax impact for you. Proceeds and cost basis will also be reflected on your 1099-B to file on your tax return.
What is a wash sale?
A wash sale occurs when you sell a stock for a loss and turn around and buy the same, or similar, stock within a 30-day period. As such, the disallowed loss is added back into the cost basis of a new purchase of the same stock that was sold for a loss and repurchased within 30 days. A wash sale can also occur when you purchase the substantially identical stock on different dates within 30 days leading up to the sale. This disallowed loss will be reported on your 1099-B tax statement.
Additional information on wash sales is available in IRS Publication 550.
How do I file my tax statements in my tax return?
At Public, we’re unable to provide tax advice. Please speak with your tax professional on how to appropriately file your tax statements in your return.
For further help please contact Member Support via in-app chat or email at support@public.com.
For informational purposes only. Open to the Public Investing, Inc. does not provide legal, tax, or accounting advice. You should consult your legal, tax, or financial advisors before making any financial decisions.