M1 Finance Taxes | How Do Taxes Work With M1 Finance #Best Education Page #Online Earning

- So, in this video today, we are going to be talking about

how taxes are handled with the M1 Finance Investing app.

It's a question a lot of people have when it comes

to investing, and I wanna 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 M1 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 video 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 of this works, and that is completely free.

So, I have that 30-minute training on M1 Finance linked up

down in the description below if you guys decide

that you wanna check that out.

But that being said, let's talk about taxes here

with M1 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 Finance

that could run into, potentially, a taxable event

or situation.

So, right off the bat, 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.

Well, 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 20% difference.

And you'll also find that right now

as the current tax code is, for the lowest income brackets,

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 unto your investments for longer than one 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 wack

in terms of your allocations,

you can click a button and rebalance that portfolio.

So, let's say, for example, say you have a 50/50 portfolio

of one stock and another stock, just two stocks,

stock A and stock B.

Well, let's say six months later,

it's no longer 50/50, it's 40/60

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

'cause 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.

They're gonna try to rebalance your portfolio.

Now, the other thing you're gonna run into here,

and again, this is gonna be with any brokerage out there,

is qualified versus ordinary dividends.

And this is 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 onto 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 Finance website.

I'll also link up to this article in the description below

if you guys want to read this yourselves,

but this is what it says on qualified 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 U.S. 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 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 calculate these date 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 gonna be taxed at a lower tax rate

than your ordinary dividends.

But anyways, guys, that wraps up this video.

Those are the basics you have to understand about taxation

with M1 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 wanna 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 video.

#Best Education Page #Online Earning

online earning,make money online, earn money online, online earning, online earning sites,

 make money online free, online money income, earn money online free, money online, best way to earn money online, online income site, money earning websites, best online earning sites, easiest way to earn money online, earn money payment bkash, online money income site