Using Robinhood Could Cost You Thousands In Taxes, Here’s Why

Using Robinhood Could Cost You Thousands In Taxes, Here’s Why

Share to Linkedin While Robinhood's app may glitter, its lack of automated tax-saving options may cause you to lose ... [+] out on a lot of gold. Free trades sound great, until you realize the price you pay for "free" could be thousands of dollars. With tax filing season in full swing, many new do-it-yourself investors are dealing with complicated tax issues for the first time. Some are getting caught up in complex IRS policies, like the wash-sale rule, and are now on the hook for hundreds of thousands of dollars. Those who are using new platforms, like Robinhood, are also hamstrung by the lack of critical functionality that helps minimize taxes. These gaps, or the manual band-aid solutions that Robinhood has deployed, could cost new investors thousands in additional taxes. Here's why. Despite its many bells and whistles, Robinhood makes it extremely difficult for investors to use a tax-strategy known as "specific-lot identification." As was first reported by The Wall Street Journal, this technique allows investors to reduce their tax bill by specifying what shares to sell, which is especially critical if they bought shares at different times and at different prices. Selling specific lots allows an investor to