Tax Tips For Any Tax Season! Breaking Down Taxable Income

Tax Season 2021 has just ended, but that doesn’t mean you can’t get a jump on tax prep for tax season 2022! Here’s some tax tips that you could help you get ready for what’s next.

Welcome back to Bold Business with David Grasso. Be sure to like, subscribe, and hit the notification bell for tax advice, and all things Bold.

Let’s talk about taxable income. What is taxable income? This is a tax on money you have earned. And there are different types of taxes dependent on the type of taxable income.

What are those? Well, we’re here to break it down for you.

First, the Stock Market. Yes, even the stock market is taxable income. Let’s say that you made an investment and then pulled out after a short while and made some money. That’s called a Short Term Capital Gains Tax. A Short Term Capital Gains Tax is a tax on profits that you sold for a year or less, and it gets taxed just like your regular income. If you held on to that stock for more than a year after you sold it, it’s actually called a Long Term Capital Gains Tax. The rate for a Long Term Capital Gains Tax could be as low as 0% dependent on a few variables including your annual income and marital status.

So, the longer you hold a stock in the stock market, the lower your tax payment on that stock will be, through the Long Term Capital Gains Tax.

Are you into crypto? It’s also a taxable income! In fact, the IRS is majorly cracking down on crypto tax compliance. If you trade crypto for money, trade it for another cryptocurrency, use crypto to buy goods or service, or earn a cryptocurrency as income, you will pay taxes! If you trade crypto like a stock it will get taxed like the stock market through capital gains tax!

The only time you do NOT get taxed on crypto is when you buy it and just hold on to it. To avoid paying taxes (or higher taxes) it’s a good idea to avoid selling any cryptocurrency or investments until a later time.

Next, unemployment taxes! It is taxable income! Yes, you will have to pay both a federal and state income tax on any unemployment, and a lot of people collected this past year. That means they will all have to pay the income tax.

For your unemployment taxes, you should receive a 1099G form to use when filing your taxes, and you will be taxed according to your federal tax bracket.

Lastly, taxes in retirement plans. Typically when you pay into a 401k it’s usually called “pre-tax dollars”. That just means it comes off of your gross salary and you pay less in income tax at that time. Yay a bonus!

But, when you withdraw from your 401k, that will be considered taxable income! The IRS taxes it just like regular income based on your tax. The same goes for an IRA.

Bottom line, the IRS wants your money by April 15th every year.

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