Investment Income Taxes

[Cowspot28]

This is my first time filing taxes with investment accounts so these are probably very simple questions. I just received 1099-B and 1099-DIV forms showing positive dividend numbers, but I actually lost several thousand dollars. I only bought and did not sell anything last year. How does this loss affect my tax liability? Can I claim the losses against my overall income? Why do the forms show that I made money? Is this where tax loss harvesting could be helpful or is that a different can of worms? Thanks for your help!

[seattlecyclone]

Merely owning shares that have declined in value has no effect on your taxes. You need to actually sell to realize a loss or gain that would be reported on your tax return. If you sold zero shares, the 1099 forms are correct when they report positive dividend income and nothing else.

Tax loss harvesting is the act of selling shares that have declined in value for the purpose of lowering your current-year tax bill. Again, you need to actually sell to get any benefit here.

[dontwannaworkforever]

Also if you make too much investment income, you can disqualify yourself for the Earned Income Tax Credit which happened to us this year. I'm not sure if that counts dividends that are re-invested; perhaps someone can chime in on this one...

[soupcxan]

Yes this is where TLH might be helpful. But it won't directly wipe out your dividend income.

[Gin1984]

Also if you make too much investment income, you can disqualify yourself for the Earned Income Tax Credit which happened to us this year. I'm not sure if that counts dividends that are re-invested; perhaps someone can chime in on this one...

Yep, they do.

[dontwannaworkforever]

Also if you make too much investment income, you can disqualify yourself for the Earned Income Tax Credit which happened to us this year. I'm not sure if that counts dividends that are re-invested; perhaps someone can chime in on this one...

Yep, they do.

Thanks for clearing this up.

[teen persuasion]

Dividends and capital gains/losses are two different things, and reported on different lines.

The thing I'm confused about in the OP is that the poster said they received a 1099 B, but did not sell anything.  Does that make sense?  I don't know enough about 1099 B, and need to learn more, obviously.

[johnny847]

Dividends and capital gains/losses are two different things, and reported on different lines.

The thing I'm confused about in the OP is that the poster said they received a 1099 B, but did not sell anything.  Does that make sense?  I don't know enough about 1099 B, and need to learn more, obviously.

Nope. Something isn't right.

[johnny847]

The 1099 B forms are proceeds from broker and barter exchange transactions through Betterment. Thanks for the replies.

If you use Betterment, then you almost certainly bought and sold shares last year. You yourself may not have been the one executing the trades, but Betterment did them for you in your name.