I know that I am in the tax bracket that is too low, so I do not have to pay tax on capital gain if it is not more than $3000 a year(about that, not sure). So, my point is, if I do not need to pay tax on it, can I choose not to report it in order to file 1040A?
Or is there any way else?
It sucks, I just wanted to experience the market, now if I sell it I lose more eligibility than the profit of the stock, not to mention the case if I have a loss I still lose eligibility :(.
Thanks all. Happy 4th of July!!!
your gain WILL be reported to the IRS by the company that handles the trade, so its best to come clean. Or dont sell it until you are out of college. that way it WILL be a long term capital gain and your tax will be only 15%[ unless the tax law is changed]
the amount you have to pay depends on how long you held the stock .
Were you hoping to use a 1040A to qualify for simplified needs or auto $0 EFC? If so, I believe that it is only one of the qualifiers. You need to have income below the threshold…and one of the following:
- Ability to file 1040 A or EZ.
OR
- Qualification for a means tested benefit like SNAP or free lunch.
OR
- A parent who is a dislocated worker.
Unless I’m wrong…the 1040A is only one of three choices in addition to your income threshold.
Hey, thanks all for the info. I guess there’s no way out then if I sell the stock. One more fact I want to confirm is if it is mutual fund, the income will be capital gain distribution (not from selling stock), that I can file on 1040A, is that correct? Same with the dividends paid out from stock?
@wayneluu91
What is your concern? Did you earn a ton of money on this investment? Why are you concerned about using a 1040 form instead of a 1040A?
Please clarify why this is a concern to you.
oh sorry. I should have made it clear. No absolutely not making money out of this investment, since I just want to experience the market after couple investment courses. I will be filling independent on FAFSA for next school year, and I thought if I am eligible to file 1040A my asset would be ignored. Otherwise, tell me if i’m wrong, I think I do not have much asset allowance according to this sheet, page 27 (I’m under 25) http://ifap.ed.gov/efcformulaguide/attachments/090214EFCFormulaGuide1516.pdf
To think about it, if I have 1000 in stock and about 2000 in saving, my EFC would be 600 for the year. That raises another question: According to FAFSA office:
Total cost for school: $15,000
Total Aid : $10,000
Offered Loan : $5,000
Need :$0
Last year my EFC was 500 due to $2000 in saving account for emergency. I was eligible to file 1040EZ, but my mom has business income so she had to file 1040. My asset was not ignored, and they took $500 from my Pell Grant. They offered $5000 in loan, that does not mean I do not need $5000. I try to not taking any loan, my goal is to graduate debt-free. I am trying to find a way to file 1040A next year to protect my emergency saving from the EFC calculation.
Thank you for your concern. I appreciate any reply.
Read that link carefully. For independent student qualification for simplified needs (which is where your assets are not counted.
Income $49,999 or less
AND ONE OF THE FOLLOWING:
- Ability to file 1040A
OR
- Eligibility for means tested benefit like SNAP or free or reduced lunch.
OR
- Dislocated worker.
It sounds like you don’t qualify for a means tested benefit…or do you? Have you applied for SNAP or food stamps? Do you qualify?
It also sounds like the only second qualifier you would have been able to easily meet (assuming you don’t quLify for SNAP) is 1040A.
You will only be assessed a small amount in terms of your assets. Consider this an investment in your future…and perhaps what the gain on this little investment can cover. It’s not a bad thing.
I realize your goal is to graduate with no debt, but having a small amount of debt isn’t going to strangle you if you are careful. It sounds like you are eligible for subsidized Direct loans…and haven’t taken them yet. So, if you really need one in case of an emergency, you could take one.
The assessment against your asset is not for the full amount as you saw last year. Actually, as a dependent student, your assets are assessed at 20% while your parent assets are 5.6%. As an independent student, I believe your asset assessment might be lower than 20%…but in any case…it’s not 100% which still leaves you with a balance in your emergency fund.
ETA…if you are an independent student with no dependents other than a spouse, you are NOT eligible for an auto $0 EFC (which would require income less than $24,000).
I can file 1040A if I do not sell any stock in the future. That’s the only way for me. I have never thought about applying for food stamps but now I will see about it. Ye, thanks to you I just realize that if I am in emergency I can always borrow the loan. 
You can consider gifting the stock to a sibling who is not in college and then he or she can sell it and might pay tax at the zero % capital gains rate. Problem solved.
What would be wrong with laying $500 or even $1000 towards your college education if you have THAT much gain from your investment?
The IRS instructions for the 1040A and 1040 will have the details on what form is required to report capital gains. I believe that you can report dividends, short term capital gains and long term capital gain distributions from a mutual fund on a 1040A. However, if you sell a mutual fund then you will need a 1040. However, mutual funds can also have other distributions which could require a 1040.
For questions like these, you should go directly to the government instructions for each form. Then contact the mutual fund companies to see what the past distributions have been to see what forms you might need to file in the future.
If you need to qualify for filing a 1040A, now is not the time to be investing in stocks unless you plan to hold them for the long term. Also stocks and mutual funds are usually not a good place for funds that are consider part of your emergency fund.
Also your need is: COA-EFC. In your case 15,000-600=14,400. Your school meet your need with grants and loans.
@thumper1 Maybe I did not make myself clear enough, but I do not have any gain on the investment yet, well 50 bucks to be honest. $1000 is the total I put in, $3000 i mentioned up there is the limit from IRS to determine if you have to pay tax on the capital gain or not based on your tax bracket, I do not have $3000 gain :).
@Madison85 That might work! Thank you.
@noname87 You’re right. I did not know the hassle until I bought it. I just wanted to try how it feel like on the market, not expecting making a big buck out of it.
Thanks all.
If you don’t have any gain on this investment, it is not going to dramatically affect your need based financial aid.
It sounds like you hope to qualify for the simplified needs test whereby your assets don’t get counted in the calculation for need based aid. How much in assets do you have? If you have $5000 in assets, $1000 would be tapped as part of your family contribution…but you would still have $4000 left. And that’s at the 20% rate.
The asset amount added to your family contribution is not 100% of the value.
There is not a tax law that says the first $3000 of capital gain isn’t taxed. I am mentioning this because you have said it twice now.
Generally all realized capital gains are taxed but the rate of federal tax is zero % if you are in the 15% bracket or lower for ordinary income, assuming income exceeds the standard deduction or itemized deductions (and personal exemption/s if not a dependent).
@thumper1 Yes, exactly, I hope to qualify for the simplified needs test so my assets won’t come into the calculation. I don’t want to lose any penny cause I need every single one, especially in the case where I can do something about it. At the end, the whole point is I just want to know is there any other way than not selling the stock to be qualified to file 1040A, but it seems like there is none, so I won’t be selling it then. It’s just my belief and goal that not to borrow any money, of course I should if I am really in emergency. Otherwise, I do my best not to take loan. I was stupid to take my emergency fund to invest in stock. I didn’t know it would cause all the hassle. I thought I could sell it back easily, oh well, but thank a lot for your advice.
@Madison85 Interesting, you’re right. I just did my research again. I must have mistaken that $3000 from the amount Capital losses can offset other income, in the same article about 10% and 15% tax bracket get 0% taxed on capital gain. Thanks.
@wayneluu91
How much in assets do you have? Are you talking tens of thousands of dollars? Or are you talking a few thousand dollars?
Can you afford to tie up the money you invested just to save a couple hundred dollars on college costs?