I have $5,000 in my checking account and plan to invest it in VOO through Robinhood. If the value goes up by the end of the year, but I don’t withdraw the money from the account, will I still have to pay any taxes?
In a regular brokerage account, any interest or dividends are taxed the year they’re credited. The same applies to capital gains or losses if you sell. For qualified accounts like IRAs, taxes only apply when you withdraw, but this doesn’t apply to non-qualified accounts like a regular brokerage.
It doesn’t matter if you take the money out or not. Dividends are taxed in the year they’re paid, and any trades or sales are also taxable for that year, even if you leave the money in the account.
Whether you withdraw money or not doesn’t change if taxes are owed. If you buy VOO and later sell it for a profit, you’ll pay capital gains tax on that profit. Also, funds like VOO pay dividends and distributions that are taxable, even if they’re reinvested. For your $5,000 example, you’d get around $60 in dividends, which would count as taxable income.
You’re only taxed when there’s a taxable event, like selling for a profit. Other than that, taxes apply to interest or dividends earned, not whether you withdraw money from the account.
Dividends are taxed every year, but just holding onto an investment that goes up in value isn’t taxed until you sell. Robinhood will send you forms like 1099-INT or 1099-DIV to show what income is taxable for the year.
Selling for a profit triggers taxes, whether or not you take the money out of the account.
Robinhood will provide you with a 1099 form showing any taxable income and realized losses from your account.
You’ll probably need to download your tax documents from Robinhood. They make it pretty straightforward.
Withdrawing doesn’t matter for taxes. Dividends from stocks are taxable, and selling stocks for a profit is also taxable. Funds like VOO pay dividends and may have distributions from sales within the fund, which count as taxable income even if you don’t sell your shares.
You’re taxed on realized gains, dividends, and interest. If you hold $5,000 in VOO and don’t sell, there are no realized gains, so no capital gains tax. However, VOO pays dividends, and those are taxed at about 15%.
If your account earns $200 in a year, you have access to that money, so it’s considered taxable income.
If you don’t take the money out, it’s not taxable. Just kidding—it’s still taxable even if you don’t withdraw it. No escaping taxes here!
Quinn said:
If you don’t take the money out, it’s not taxable. Just kidding—it’s still taxable even if you don’t withdraw it. No escaping taxes here!
Maybe.