Taxes are a necessary and basic fact of life for all Americans.
In boom times, everyone knows that the more they profit from investment accounts, the higher their taxes will be. But taxes can become especially painful when you experience financial losses and still have to pay more on top of it. Tracking your investment gains and losses for tax purposes during the year can help you better prepare for April 15, both financially and emotionally.
Using Calculation Tools
- The first step to tracking investment gains and losses for tax purposes is to take the time to build a spread sheet as a master list of your checks and balances. Listed on there should be all the investments you have, including your home, stocks, bonds and any other financial instrument in your portfolio. Then as situations develop, you need to mark down the changes and put money aside that may be due to the IRS. Two such programs that can be utilized to keep track of investment gains and losses for tax purposes are Microsoft Excel or OpenOffice's Calculator.
- Secondly, there is plenty of financial software available that can make the whole process of keeping track of investment gains and losses for tax purposes an easy task to manage. Programs such as Microsoft Money and Intuit's Quicken are already set up so all you would have to do is enter the appropriate data regarding your assets. If you have an online trading account, you can most likely download all your brokerage data directly into those programs and save yourself additional time and hassle.
Depending on the size of your brokerage, you may also be able to track investment gains and losses for tax purposes by requesting that they track cost basis for you. This option will only work if you use only one broker for all your buying and selling transactions. Many online brokerage sites have tools that can automatically calculate taxes for you as well.
