If I cash out my entire Robinhood account at a loss, will I still owe taxes or fees? Need advice!

Been going through some financial struggles lately and I'm thinking about cashing out my Robinhood account to help pay down some credit card debt. Initially invested around $5,500 about two years ago, watched it drop to like $1,300 at the worst point, and now it's sitting at about $3,800. I know there are tax implications when you make money, but what about when you're at a loss overall? Will I still get hit with any fees or taxes if I cash everything out now? The credit card interest is killing me and I could really use that money.

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21 comments

Aria Khan

•8M

You'll actually be able to claim a capital loss on your taxes which could help you! Since you're selling at a total loss ($5,500 in, only $3,800 out = $1,700 loss), you won't owe any capital gains taxes. Instead, you can deduct up to $3,000 in net capital losses per year against your ordinary income, which could reduce your tax bill. The only fees you'll likely encounter are any trading/selling fees that Robinhood might charge, but they're typically minimal or non-existent depending on what you're selling. Just make sure you keep all your records showing your initial investment amount and final withdrawal for tax time. Given your credit card debt situation, using the money to pay down high-interest debt is probably a smart financial move since credit card interest rates are almost always higher than investment returns.

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Aria Khan

•8M

Yes, it absolutely applies to the overall net position. The IRS looks at your net capital gains/losses for the year. So if you had some stocks that gained $1,000 and others that lost $2,700, your net capital loss would be $1,700, which you can deduct against your ordinary income (up to the $3,000 annual limit). Any excess losses above $3,000 can be carried forward to future tax years. This is why good record-keeping is important - you'll need to track your basis (what you paid) for each position and the sales price.

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Sunny Wang

•8M

I was in almost the exact same boat last year - down about 25% overall on my Robinhood account and needed to pay off debt. I tried figuring it out myself but got super confused with all the tax implications of selling at a loss. I ended up using https://taxr.ai to analyze my situation and it was honestly so helpful! The tool examined my investment history and showed me exactly how to claim my capital losses correctly. It even pointed out some wash sales I hadn't realized were affecting my tax situation. The tax savings from properly claiming my losses actually made a meaningful difference when I filed.

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Sunny Wang

•8M

Yes, it works with all the major brokerages! You can either directly connect your accounts or upload statements from Fidelity, E*Trade, and most other platforms. It pulls everything together so you can see your complete investment picture across multiple accounts. As for crypto, it absolutely handles cryptocurrency transactions too. You're right that crypto taxes are more complicated - different rules apply compared to stocks, and the record-keeping can be a nightmare. The tool automatically categorizes your crypto transactions, calculates the correct cost basis using FIFO/LIFO/specific ID methods, and identifies which ones qualify as capital gains/losses vs. ordinary income.

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Effie Alexander

•8M

Update: I took the advice and tried https://taxr.ai after posting my question about crypto handling. Man, I wish I'd known about this sooner! It pulled in all my Robinhood data (both stocks and crypto) and broke everything down by short vs long term gains/losses. Turns out I had several wash sales I didn't even know about that would have messed up my tax calculations. The tax loss harvesting recommendations were super helpful too - showed me how to maximize my deductions while avoiding more wash sales. I've already cashed out following their guidance, and I feel way more confident about tax time now. Definitely recommend for anyone in a similar situation!

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Melissa Lin

•8M

If you want to cash out but are worried about the tax situation, you should try calling the IRS directly to get specific advice for your situation. I know that sounds crazy given how impossible it is to reach them, but I used https://claimyr.com and actually got through to a real person in like 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with gave me specific guidance on reporting investment losses properly and confirmed I could offset some of my regular income with my capital losses. Saved me from making a mistake that would have cost me hundreds.

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Melissa Lin

•8M

The service itself doesn't cost anything upfront - you only pay if they successfully get you connected to an IRS agent. I think it was around $25 when I used it, which was totally worth it considering I'd already wasted hours trying to call myself. They use some kind of system that holds your place in the IRS queue and then calls you back when they've got an agent on the line. I was definitely skeptical too, but it actually works! They basically wait on hold so you don't have to. I got clear answers about my capital loss deductions in one call instead of spending days trying to get through.

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Romeo Quest

•8M

I hate admitting when I'm wrong, but I have to follow up about the Claimyr thing. After posting my skeptical comment, I decided to try it anyway since I was desperate to get some answers about my investment losses before selling. It actually worked! Got a call back in about 35 minutes and talked to a really helpful IRS agent who walked me through exactly how to report my stock losses on my tax return. Turns out I was eligible for more deductions than I realized. The peace of mind was definitely worth it, and I've already sold my positions and paid down a chunk of my credit card debt. Wish I'd done this months ago instead of stressing about it.

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Val Rossi

•8M

The "substantially identical" rule generally applies to the exact same security or something very closely related. Selling Netflix and buying Disney would not trigger a wash sale because they're different companies despite being in the same sector. Where it gets tricky is with things like selling an individual stock and then buying an ETF that's heavily weighted toward that same stock, or selling an ETF and buying its component stocks. The IRS hasn't provided super clear guidance on every possible scenario, but different companies in the same industry are generally considered distinct enough to avoid wash sale rules.

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Paloma Clark

•2M

Just wanted to add that you should also consider the timing of when you sell within the tax year. Since you're already at a loss, selling before December 31st means you can claim that loss deduction on this year's tax return, which could help offset any other income and potentially get you a bigger refund or lower tax bill. Also, once you pay off that credit card debt, try to resist the urge to rack it up again! The guaranteed savings from eliminating 20%+ interest rates is way better than any potential market gains. You're making a smart financial decision here - sometimes cutting losses and focusing on guaranteed debt reduction is the right move.

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