M1 Finance Taxes | How Do Taxes Work With M1 Finance? #Finance

so in this CashNews.co today we are going to be talking about how Taxes are handled with the em1 Finance investing app it’s a question a lot of

people have when it comes to investing and I want to do my best here to answer some of the basics of what you should expect tax wise when using this investing app now that being said if you guys are looking to learn more about the basics of investing with m-1

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance it is a really good investing platform but it is a little bit complicated I found I was getting a lot of questions from people so I ended up putting together a 30-minute

CashNews.co training that walks you through step-by-step how to open an account with them how to build a Portfolio what are pies and how all this works and that is completely free so I have that 30-minute training on m1

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance linked up down in the description below if you guys decide that you want to check that out but that being said let’s talk about Taxes here with m1

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance and what you should be expecting and there is one thing you need to be aware of related to their rebalancing functionality of m1

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance that could run into potentially a taxable event or situation so right off the bat I’m just the basics of how Taxes are handled with investing is you have both short-term

Capital gains and then you have long-term Capital gains so short-term Capital gains for the most part that’s the type of Taxes you want to avoid and that is any kind of Capital gains from an investment held

for one year or less so let’s say for example you bought Amazon stock and then you sold it six months later while any Capital gains you had in that six month period would be short-term Capital gains and you would be taxed at the same rate as your ordinary

Income tax and that is always going to be higher than your long-term Capital gains tax rate so if you hold these Investments for longer than one year it could literally just be 366 days well now it falls under the category of a long-term

Capital gain and this can be a significant difference in Taxes in some cases as much as a 20% difference and you’ll also find that right now as the current tax coats is for the lowest Income brackets on the long term Capital

gains tax rate is actually 0% so you can avoid paying Taxes altogether so that’s the first thing you have to understand with m1 Finance and any

Brokerage out there that you invest in you have both long term and short term Capital gains and there’s a significant tax advantage to holding on to your Investments for longer than 1 year in order to recognize long term

Capital gains now the other thing you have to be familiar with is the rebalancing feature of m1 Finance and essentially what that is that means as your

Portfolio gets out of whack in terms of your allocations you can click a button and rebalance that Portfolio so let’s say for example sake you had a 50/50 Portfolio of one stock and another stock just to stock stock a and stock B well

let’s say six months later it’s no longer 50/50 it’s 4060 because one is doing a lot better than the other well you could rebalance that Portfolio by clicking on that button to rebalance but the issue you’d run into is you are exposing yourself to a taxable

event because what’s gonna happen is the stock that you’re overweight in that you have 60% of your money in well they’re gonna sell some of that and then they’re gonna buy more of the other one that you’re low in and by selling you have recognized a short-term

Capital gain which is going to be taxed at the highest Income level rather than rebalancing by clicking that button and rebalancing your Portfolio the best situation is to simply add more money to that Portfolio and as you add

money m1 Finance is going to automatically rebalance your Portfolio so understand that with the rebalancing feature is that every time you click on that

button to rebalance you could potentially be exposing yourself to short-term Capital gains so always consider that when you’re doing that and the best thing to do to avoid that is just to contribute more money that’s going to automatically they’re gonna try to

rebalance your Portfolio now the other thing you’re gonna run into here and again this is going to be with any Brokerage out there is qualified versus ordinary Dividends in this honestly quite a complicated subject here but in a nutshell the

way it works is that with a qualified dividend you are paying a lower tax rate now I’ll go ahead and read you guys the guidelines on what a qualified dividend is and to be honest with you guys it’s even confusing to me but what you have to understand basically is that by holding on to a

dividend paying stock for a long enough period of time eventually just like with long term Capital gains tax rate you’re paying a lower tax rate on what is called a qualified dividend okay so this actually comes right from the m1

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance website I’ll also link up to this article in the description below if you guys want to read this yourself this is what it says unqualified Dividends to be classified as qualified

Dividends and be taxed at a lower dividend tax rate they must satisfy three requirements number one paid by domestic corporations or qualified foreign companies that trade on the u.s. Stock Exchanges or are incorporated in a u.s. possession so basically it’s

a company that trades on a major US exchange that pays a dividend the second qualification must be ordinary Dividends and are not Capital gains distributions or Dividends from tax exempt entities which is something you’re probably not going

to run into I have seen Capital gains distributions before with some of my other Investments for example I own a utility stock and I remember one time there was a there was a special distribution that was because they sold off a section of their business and it

wasn’t just an ordinary dividend and then the final piece this is where things get confusing met the minimum holding period requirement which is more than 60 days during the 121 day period starting 60 days prior to the ex-dividend date for common stocks and then for preferred stock it’s

more than 90 days during the 181 day period starting 90 days before the ex-dividend date for preferred stocks so do you really need to sit down there and like calculate these dates out yourself no you don’t all you have to understand is that once you hold most dividend stocks long enough you

do have qualified Dividends that are going to be taxed at a lower tax rate than your ordinary Dividends but anyways guys that wraps up this CashNews.co those are the basics you have to understand about taxation with m1

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance the one thing that you really just have to watch out for is that rebalancing feature understanding that by doing that you could be exposing yourself to a taxable event if you guys do want to learn more about m1

Finance feel free to check out that free 30 minute training linked up in the description below and other than that guys that’s gonna wrap this up so thanks so much for

watching and I will see you in the next CashNews.co