Robinhood Tax Loss on Form 8949 (2024)

FAQs

Can I claim Robinhood losses on taxes? ›

Generally, the IRS allows up to $3,000 of a capital loss against your income. So if you generate losses that, after accounting for any gains, add up to a $3K net loss, this could help your overall tax bill. Any losses above this amount, can be carried forward against income in future years.

If you've sold any stocks during the tax year, it will be reported on a Form 1099-B which you will receive from Robinhood. You need to transfer the information from your 1099-B to a Form 8949. Form 8949 is used to document sales of stocks.

To calculate gain or loss, subtract selling price from purchase price. When dealing with several shares of stock, prices can be multiplied by the number of shares being sold: Total Capital gain or loss = (Purchase price x # of shares) - (Selling price x # of shares) - Any expenses (commissions, margin interest, etc.)

You almost certainly pay a higher tax rate on ordinary income than on long-term capital gains so it makes more sense to deduct those losses against it. It's also beneficial to deduct them against short-term gains which have a much higher tax rate than long-term capital gains.

Capital losses that exceed capital gains in a year may be used to offset capital gains or as a deduction against ordinary income up to $3,000 in any one tax year. Net capital losses in excess of $3,000 can be carried forward indefinitely until the amount is exhausted.

Instead of completing Form 8949, you can submit a substitute statement. Format your substitute statement similarly to the Form 8949 itself. First, create or get the substitute statements you want to attach to the return.

If you sold some stocks this year, you're probably aware that you will need to include some information on your tax return. What you may not realize, is that you'll need to report every transaction on an IRS Form 8949 in addition to a Schedule D. To find out more about form 8949, watch this video.

Form 8949 isn't required for certain transactions. You may be able to aggregate those transactions and report them directly on either line 1a (for short-term transactions) or line 8a (for long-term transactions) of Schedule D.

Is it possible to lose more than the theoretical max loss? Yes. For every call that's exercised, you'll purchase 100 shares of the underlying stock. Owning shares can result in losses greater than the premium paid for the call option.

What is the wash rule on Robinhood? ›

You've executed a wash sale if you sell or trade stock or securities at a loss and within 30 calendar days, do one of the following: Buy or acquire substantially identical stock or securities as a taxable trade. Acquire a contract or option to buy substantially identical stock or securities.

All you need to do is choose how many shares to sell and what you want the stop price to be. The stop price of a sell order needs to be below the current market price. Otherwise, it would immediately trigger and become a market order. The idea of using a stop price is to protect your position from sharp declines.

If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon.

The investor must confirm that the stock has no market value and that the company is not operating or is in liquidation.

Capital losses can be used as deductions on the investor's tax return, just as capital gains must be reported as income. Unlike capital gains, capital losses can be divided into three categories: Realized losses occur on the actual sale of the asset or investment. Unrealized losses are not reported.

How Are Stocks Taxed on Robinhood? IRS Publication 550 explains the rules in much greater detail, but investments managed through Robinhood get taxed the same way as other investments. Dividends are still divided into qualified and ordinary dividends, with qualified dividends being taxed at a lower rate.

Capital losses

You can only claim a loss for shares or units you have disposed of. You can't claim a 'paper loss' on investments you continue to hold because they may have decreased in value.

Here's what you need to do to report your loss: Report any worthless securities on Form 8949. You'll need to explain to the IRS that your loss totals differ from those presented by your broker on your Form 1099-B and why. You need to treat securities as if they were sold or exchanged on the last day of the tax year.

Selling a stock for profit locks in "realized gains," which will be taxed. However, you won't be taxed anything if you sell stock at a loss. In fact, it may even help your tax situation — this is a strategy known as tax-loss harvesting. Note, however, that if you receive dividends, you will have to pay taxes on those.