Tax information

The IRS currently considers cryptocurrencies "property" rather than currencies, which means they're treated a lot like traditional investment (such as stocks). Selling at a profit triggers capital gains tax, while selling at a loss may allow you to take deductions. To learn more, check out our crypto tax guide.

Taxable income is income the IRS can tax you on. When we hear taxable income, we generally think of wages from a job or freelance work. Here are some additional income sources you can be taxed on: 

• Interest income, whether from a savings account or bonds 
• Dividend income 
• Investment income, like short-term and long-term capital gains 
• Rental income from a property you own 
• Capital gains on the sale of a home (though there's an exemption that applies first) 
• Unemployment benefits 
• Severance pay 
• Lottery winnings and other prizes 
• Gambling winnings 
• Alimony for agreements entered before 2019
• Jury duty costs 
• Pension payments (though there are exceptions) 
• Social Security benefits (there are exceptions for lower-income seniors) 
• Traditional retirement plan withdrawals 
• Settled debts where a portion of what you owe is forgiven (there are exceptions for bankruptcy filings)

Tax-loss harvesting allows you to sell investments that are down, replace them with reasonably similar investments, and then offset realized investment gains with those losses. The end result is that less of your money goes to taxes and more may stay invested and working for you. 

Having a mix of both pretax and Roth contributions can help create additional flexibility in retirement to respond to a great unknown—future tax rates. For people who expect income in retirement to be as high or higher than their current level, others who expect their tax rate in retirement to be higher than today, or younger people who expect steady income growth over their careers, Roth IRA contributions may be the better choice. But if you believe that your tax rates will be lower in retirement than they are now, you may want to prioritize pretax vehicles like the Traditional IRA. Our IRA Contribution Calculator allows you to answer a few questions and find out which one might be right for you.

If you completed a conversion or rollover to a retirement account, you will receive Form 5498, as it reports any type of contribution within a tax year.

If you took a qualified charitable distribution (QCD), you will receive Form 1099, as it reports distributions within a tax year.

A corrected 1099 is what's issued if there's incorrect information in a 1099.

If you have an income tax return filing extension, you don't also get an extension on contribution deadlines (e.g., a personal IRA contribution).

ETFs tend to be more tax efficient than traditional mutual funds. In most cases, ETFs don't have to sell assets and create taxable gains for shareholders in order to meet redemptions because of the in-kind redeem mechanism.

Married couples can file taxes as married filing jointly. This can lead to tax savings for some taxpayers in the middle of the income spectrum.

Roth IRAs have some tax advantages. Since contributions are made after taxes, you can withdraw those contributions any time tax-free and penalty-free. Once you reach age 59½ and meet the 5-year requirement, you can also withdraw earnings tax-free and penalty-free.