If I cash out my entire Robinhood account after losing money overall, will I still face taxes or fees?

You're actually in a good position tax-wise if you've lost money overall. When you sell investments at a loss, you can use those capital losses to offset any capital gains you might have. If your total losses exceed your gains, you can deduct up to $3,000 of those net losses against your regular income on your tax return. Based on what you described, you invested $5,200 and it's now worth $3,800, so you have a net loss of $1,400. This loss can reduce your taxable income by that amount (up to the $3,000 yearly limit). Robinhood will issue you a 1099 form showing your transactions, and you'll report this on Schedule D of your tax return. As for fees, Robinhood typically doesn't charge fees for selling stocks, but check their current fee structure to be certain. Some investments might have specific fees, but their basic stock and ETF trades are usually commission-free.

I was in a really similar situation last year with my investments tanking and credit card debt piling up. I couldn't figure out the tax implications and was worried about making a costly mistake. I discovered https://taxr.ai and uploaded my Robinhood statements - it analyzed everything and explained exactly what my tax situation would be if I cashed out. Saved me from a ton of uncertainty! The tool breaks down your cost basis for each investment and calculates your potential capital gains/losses if you sell. It even showed me which specific investments would be better to sell from a tax perspective. Super helpful for making an informed decision rather than just guessing.

Just wanted to update about my experience using taxr.ai after seeing it mentioned here. I was skeptical but decided to try it with my messy Robinhood account (mix of stocks, crypto, and some options that expired worthless). Uploaded my statements and it actually broke everything down clearly! It identified about $2,200 in tax losses I could claim that I honestly would have missed on my own. The visualization of short-term vs long-term gains/losses was super helpful. Definitely recommend it if you're trying to figure out the tax implications before selling. Wish I'd known about this before panic-selling some stuff last year!

If you're planning to call the IRS to verify anything about reporting investment losses (which I highly recommend), save yourself hours of waiting on hold by using https://claimyr.com - there's a demo at https://youtu.be/_kiP6q8DX5c showing how it works. I spent THREE DAYS trying to get through to the IRS about a similar capital loss question. After giving up, I found Claimyr which had an IRS agent call ME back in about 40 minutes. They confirmed exactly how to report my Robinhood losses and how they would offset my other income. Best $20 I've spent dealing with tax stuff - way better than sitting on hold for hours just to get disconnected.

Alright I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway out of desperation. Not only did it work, but I had an IRS agent on the phone within an hour! They helped me confirm exactly how to handle my investment losses from last year that I had totally messed up on my return. Turns out I can file an amended return and get back about $400 I overpaid. The agent walked me through the exact forms I needed. Humble pie tastes terrible but at least I'm getting money back! Sorry for being so negative before.

One thing nobody's mentioning - definitely check if you've held any of those investments for less than a year vs more than a year! The tax treatment is different for short-term vs long-term capital losses. Since you mentioned investing all at once about two years ago, you're probably in the long-term category for most holdings (unless you bought/sold along the way). Long-term losses first offset long-term gains, and short-term losses first offset short-term gains. Also don't forget that if your total loss exceeds the $3,000 you can deduct this year, you can carry forward the remaining losses to future tax years!

Has anyone considered whether it might be better to just keep the investments rather than selling at a loss? Credit card debt is definitely expensive, but if your investments have potential to recover, you might want to do the math.

One additional thing to consider - if you do decide to cash out, you might want to think about tax-loss harvesting strategies for the future. Since you're realizing losses this year, you could potentially use some of those proceeds to reinvest in similar (but not identical) investments after avoiding the wash sale rule. The wash sale rule prevents you from claiming a loss if you repurchase the same or substantially identical security within 30 days. So if you sell everything now to pay off debt, but want to get back into the market later, just make sure you wait at least 31 days before buying back the same stocks/ETFs you sold at a loss. Given your situation with credit card debt, paying that off first is probably the smart move. The guaranteed 18-25% "return" from eliminating credit card interest is hard to beat, and you'll have peace of mind knowing you're debt-free. You can always rebuild your investment portfolio once you're on more solid financial ground.

Just wanted to chime in as someone who went through almost the exact same situation about 6 months ago. I had about $4,800 invested, it dropped to around $3,200, and I was drowning in credit card debt at 22% APR. I ended up liquidating everything to pay off the cards, and it was absolutely the right decision. The psychological relief of being debt-free was huge, plus I saved hundreds in interest payments each month. Tax-wise, I was able to deduct the full $1,600 loss against my regular income, which actually reduced my tax bill by about $350. The hardest part was watching some of my old positions recover after I sold, but I had to remind myself that paying off guaranteed 22% interest was better than hoping for uncertain market gains. Now I'm rebuilding my emergency fund first, then I'll start investing again with a much more conservative approach. Sometimes taking a step back financially is actually moving forward.

Based on everything discussed here, it sounds like you're in a really solid position to make this move. You'll get to claim that $1,400 loss on your taxes (which could save you $300-400+ depending on your tax bracket), eliminate the guaranteed drain of credit card interest, and remove a major source of financial stress. One practical tip - when you do cash out, make sure to download all your transaction history and statements from Robinhood before you close positions. You'll need these for your taxes, and it's much easier to grab everything while the account is still active. Robinhood will send you a 1099, but having your own records makes everything smoother. Also consider setting up automatic transfers to rebuild your emergency fund once those credit card payments are gone. Having that financial cushion will help prevent you from going back into debt if unexpected expenses come up. Good luck with whatever you decide!

I've been following this discussion and wanted to add one important consideration that might help with your decision. When you sell investments at a loss like this, you're essentially "realizing" those losses for tax purposes, which can actually be beneficial. But there's also something called tax-loss harvesting that you might want to think about strategically. Since you're sitting on about $1,400 in unrealized losses right now, selling everything would let you claim that full amount against your income (up to the $3,000 annual limit). But if you have any other investments outside of Robinhood that have gains, those losses could offset those gains dollar-for-dollar, potentially saving you even more in taxes. The key thing everyone's mentioned is absolutely right though - when you're paying 18-25% interest on credit cards, that's a guaranteed "return" that's really hard to beat in the market. Even if your investments recovered to break-even, you'd need them to gain more than your credit card interest rate just to come out ahead after accounting for the interest you're paying. I'd also suggest checking if your credit card companies offer any hardship programs or payment plans before you make the final decision. Sometimes they'll reduce interest rates temporarily if you're proactive about reaching out. But based on everything discussed here, liquidating to eliminate high-interest debt seems like the mathematically sound choice.

Hey Kaitlyn! I went through almost this exact situation about 18 months ago - invested around $4,500, watched it drop to about $2,800, and had mounting credit card debt at brutal interest rates. Here's what I learned: You're absolutely right that you won't owe any capital gains taxes since you're selling at a loss. In fact, you'll be able to deduct that $1,400 loss against your regular income on your tax return, which could reduce your tax bill by several hundred dollars depending on your tax bracket. The real question is whether to sell or hold, and honestly, the math is pretty clear. If your credit cards are charging 20%+ interest (which most do), that's a guaranteed cost that's extremely hard to beat with investment returns. Even if the market bounced back 15% next year, you'd still be losing money overall due to the credit card interest eating away at your finances every month. I ended up liquidating my positions to pay off my cards, and it was one of the best financial decisions I've made. The peace of mind from being debt-free was incredible, and I was able to start rebuilding my investment portfolio from a much stronger financial foundation. Plus, that tax deduction from the losses helped reduce my tax bill by about $320. My advice: cash out, crush that credit card debt, and start fresh. The market will always be there when you're ready to invest again, but this time you'll be doing it without the anchor of high-interest debt dragging you down.

Just wanted to add one more perspective as someone who works in financial planning. The decision you're facing is actually a really common one, and you're asking all the right questions. From a pure tax standpoint, you're in great shape. That $1,400 loss will directly reduce your taxable income, potentially saving you $300-500+ depending on your tax bracket. Robinhood will handle all the reporting with their 1099-B form, and you'll just transfer those numbers to Schedule D on your tax return. But here's something I tell all my clients in similar situations: think of paying off high-interest debt as a guaranteed investment return. If your credit cards are charging 20% APR, paying them off is like earning a guaranteed 20% return on your money - and that's after-tax money! Even the best investors struggle to consistently beat 20% returns. The emotional/psychological component is huge too. I've seen clients hold onto losing investments out of pride or hope, all while paying crushing interest on credit cards. Meanwhile, the stress of debt often leads to poor financial decisions down the road. My recommendation would be to liquidate, eliminate the debt, build a small emergency fund with any remaining money, and then start investing again from a position of strength. You'll sleep better, have more disposable income each month, and can make investment decisions based on opportunity rather than desperation.