Tax reports for your investment portfolio

Capital gains tax is a tariff that investors pay on the profit made from selling an investment. The specific tax implications of capital gains differ depending on the tax residency of the investor, however in some countries such as the US, there are different levels of taxation depending on how long the investor holds the investment before selling. For example, in the US, short-term capital gains (for stocks held for less than a year) are taxed at ordinary income rates; however long-term capital gains (for stocks held for a year or longer) are taxed at rates of 0%, 15% and 20%, depending on the investor’s income, which is a discounted rate compared to ordinary income tax rates. In the UK, however, capital gains tax is only paid if the investor has exceeded the Annual Exempt Amount (AMA), and the tax rate for capital gains on shares ranges from 10% to 20% depending on the investor’s tax bracket.

Investors can calculate the capital gains on investments they have sold by calculating the difference between the value of the purchase price (adjusted to include any transaction fees) and the current market value at the point of sale. The tax implications resulting from this will differ depending on the tax residency of the investor, so please refer to your local tax authority or tax accountant for information on capital gains tax.

If you incur capital gains or losses on the sale of an investment, then depending on your tax residency, you may need to disclose the capital gain/loss in your tax form. For specific advice on reporting capital gains, please refer to your local tax authority or tax accountant.

Depending on your tax residency, dividends may be considered taxable income. In some countries such as the US, dividend income is generally taxable (with the exception of 401ks which are typically tax-deferred until withdrawal); while in the UK investors receive an allowance for tax-free dividends, and will need to pay tax if their dividend payments exceed the threshold (excluding dividends paid into an ISA). The tax implications of dividends are different in each tax residency, so for specific information on reporting dividend income in your tax return please consult your local tax authority or tax accountant.

In many countries, ETF distribution income is considered taxable income, just the same as dividends paid by individual stocks. However, this is often dependent on certain factors such as how long the investor has held the ETF or whether the ETF consists entirely of stocks. The specific taxation details will depend on the investor’s tax residency.

Done manually, calculating taxable income from dividends can be a tedious process, requiring investors to sort through a combination of paper statements and digital statements via multiple share registries. However, Sharesight automates this process by automatically tracking dividends and distributions. Sharesight also makes it easy for investors to calculate the taxable income on their dividends by using Sharesight’s Taxable Income Report. This report displays a portfolio's dividends and interest payments, along with the relevant totals investors need to complete their tax return.

Unrealized capital gains occur when the value of an investment in an investor’s portfolio has increased, however the investor has not sold the investment. This means the gains have not been “realized”. Unrealized capital gains are useful information for investors who want to use tax loss selling (or tax loss harvesting) to minimize their net capital gains during the financial year for tax purposes.

Sharesight’s Taxable Income Report is designed for investors looking for a complete list of the dividends and interest they earned over the time period of their choice. It is a useful tool for investors who need to prepare their tax return, including investors who invest in foreign markets and need a breakdown of their local and foreign dividend income.