Best Articles to Read: What Robinhood Traders Need to Know About Taxes (WSJ)

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Although a lot of the hype has died down from the Robinhood trading frenzy, there is a lot of information people should know about stock trading. The WSJ article titled “What Robinhood Traders Need to Know About Taxes” does a great job of explaining how taxes work for stock trading, and I would highly recommend it if you have just gotten into trading.

In the article, it discusses a lot of the basics you should know about how stock trading impacts your tax returns. This includes things like long-term vs. short-term trading, and how you may be eligible for more favorable tax rates on your capital gains if you have held investments for longer than a year. While this does not apply to day traders and people who actively manage their portfolios, it can be a good thing to consider when deciding whether or not to sell a stock.

Additionally, the WSJ article discusses concepts like offsetting gains and losses, which can be very helpful if you have had an up-and-down year (which is very likely especially during the time of COVID). Another concept the article discusses that has become relevant recently is how options work. Options allow you traders to multiply their gains (but also their losses), and fall into a more special type of category. If you have been doing a lot of options trading and are unfamiliar with how it may impact your taxes, the WSJ article recommends dealing with professional tax help.

Overall, filing taxes can be tricky enough, but it can get even more difficult if you have tried to supplement any income with stock purchases. While I am no expert on tax myself, I found reading this WSJ article very informative for both tax and investing purposes (as it allows you to define a more sustainable investing strategy). This is not an article that will file your taxes for you, but it it is a great first step if you are unsure of where to start!

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