Your 1099 tax forms from your brokerage firm contain a wealth of information to help you plan for 2025. Reviewing your 1099 tax forms can help you not only accurately report your taxes, but may also uncover tax planning opportunities.
These forms should be available from most brokerage firms by late February. Typically these 1099s will be issued as a composite report containing three forms:
- 1099-DIV (Information on dividends you received during the tax year.)
- 1099-INT (Information on interest you received during the tax year.)
- 1099-B (Information on capital gains and losses from sales of securities.)
These 1099 reports will be used to prepare your taxes but they also contain a wealth of information to help you understand the tax structure of your investments and conduct tax planning for the current year.
It is important to know what to look for in your 1099-DIV, 1099-INT, and 1099-B tax forms from your brokerage firm. Here are a few tips to consider as you review your 1099 tax reports.
Reviewing Your 1099-DIV Tax Form
- Qualified vs. Ordinary Dividends. Box 1a and 1b will show your total dividends and a breakout of your qualified dividends. Qualified dividends (typically dividends from common stocks) receive a special lower tax rate. If you have a high percentage of ordinary dividends consider holding these types of investments in tax deferred or Roth accounts.
- Check Capital Gains Distributions. When your mutual fund or ETF sells securities for a net gain during the year, these capital gains will be passed onto you and reported on this form. If this amount is high as a percentage of your assets it is worth reviewing your portfolio to see which funds are distributing the gains. It may make sense to hold these funds in a tax-deferred or Roth account instead going forward.
- Look for Foreign Tax Paid. If you hold international investments (typically this would be from one or more of your ETFs or mutual funds) there may have been some foreign tax paid. You may qualify for a foreign tax credit to offset this amount. If these funds were instead held in your IRA or 401k you would not be eligible for the credit.
- REIT and other Alternative distributions. REIT (Real Estate Investment Trust) distributions will often contain a mix of income and return of capital. The capital return portion is not taxable but will lower your basis in the fund. Understanding your basis can help you make smart tax planning decisions with this asset.
1099-B
- Check Your Cost Basis Reporting. The 1099-B will contain the amount of the proceeds from the sale of securities. Check to see if there are any blank spaces in the “cost or other basis” column. You will need to report the cost basis to the IRS yourself. This is most common if you hold alternative investments such as cryptocurrency.
- Look For Wash Sales. Wash sales occur if you sold a stock for a loss and purchased the stock within 30 days before or after the sale. The loss will be disallowed in this case. Generally, you want to avoid wash sales if possible. If the wash sales were done accidentally make sure to add this as a factor to your trading this year.
1099-INT
- Tax-Exempt vs. Taxable Interest. Consider the balance of taxable and tax-exempt interest (if any) you are receiving from your bond portfolio. This could reveal tax planning opportunities such as locating taxable bonds in tax deferred accounts, and calculating the after-tax return of taxable vs. tax exempt bonds in your portfolio to determine which type makes the most sense for your portfolio this year. (Note – your 1099-DIV may also contain tax-exempt interest that was paid from a mutual fund or ETF.)
- Government Securities (IBonds, Treasuries, etc.). Interest from Treasuries is taxable as ordinary income at the federal level, but may be exempt from state income tax in your state.
As always, make sure to do your own research and/or check with your tax advisor before applying these ideas to your personal situation.
If you have questions on reviewing your 1099 tax forms feel free to contact me. I try to answer every reader email in a reasonable time frame.
