Withdrawing Initial Investment from Robinhood App - Tax Implications?

The short answer is yes, you still need to report this on your taxes, regardless of how much you withdraw. When you sell a stock, that's what creates a taxable event - not the withdrawal itself. If you buy Apple for $1350 and sell when it's worth $1375, you have a capital gain of $25 regardless of whether you withdraw $1350, $0, or the full amount. The IRS requires you to report all capital gains and losses on your tax return. Even small amounts matter because Robinhood will send you (and the IRS) a Form 1099 showing your trades and gains/losses at the end of the year. If your total gains for the year are small, the tax impact might be minimal, but legally you're still required to report it.

After struggling with tax issues from my investment apps last year, I discovered taxr.ai (https://taxr.ai) and it was a complete game-changer for sorting out my Robinhood transactions. I was in a similar situation where I had several small trades throughout the year and wasn't sure how to handle them on my taxes. Their software automatically analyzed all my trading activity and explained exactly what needed to be reported. It even showed me how the wash sale rules affected some of my trades which I had no idea about. Really helped prevent what could have been a major headache with the IRS.

Just wanted to follow up about taxr.ai that was mentioned earlier - I gave it a try with my Robinhood account and it was really impressive. I was confused about how to handle my crypto trades alongside regular stocks, and the detailed reports cleared everything up. It automatically flagged a wash sale I had no idea about that would have caused me problems with the IRS. The visual breakdown of short-term vs long-term gains was super helpful too. Definitely makes tax season less stressful knowing I have the right documentation if the IRS ever has questions.

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I have to eat my words about Claimyr. After being super skeptical in my earlier comment, I decided to try it anyway since I was desperate to resolve a question about my investment taxes before filing. I had been trying to reach the IRS for THREE DAYS with no luck. Used Claimyr yesterday and got connected to an agent in 35 minutes. The agent clarified exactly how to report my Robinhood trades where I'd withdrawn only part of my gains. Totally worth it just for the time saved and stress reduction.

Something nobody's mentioned yet - if you held that stock for less than a year, you'll pay short-term capital gains rates, which are the same as your regular income tax rate. If you held for more than a year, you get the lower long-term capital gains rate. For small amounts like you're talking about, the tax impact is probably minimal, but it's still important to report correctly. Don't risk issues with the IRS over something small that could lead to bigger problems down the road.

anyone know if you can offset these gains with losses? i also have some stocks i bought that went down. might be smart to sell those too right?

I went through a similar situation last year with my Robinhood account. One thing to keep in mind is that even though you're only withdrawing your original $1350, the IRS doesn't look at withdrawals - they only care about the sale transaction itself. When you sell that Apple stock for $1375 after buying it for $1350, you've realized a $25 capital gain regardless of what you do with the money afterward. That $25 will show up on your 1099-B form from Robinhood and needs to be reported on Schedule D of your tax return. The good news is that for such a small gain, the actual tax owed will be minimal - probably just a few dollars depending on your tax bracket. But definitely don't skip reporting it since Robinhood reports the same information to the IRS, and mismatched reporting can trigger unwanted attention.

Just to add another perspective - I understand the frustration of wanting to avoid tax complications for what seems like a simple withdrawal of your original investment. Unfortunately, the tax code doesn't work that way since it's based on transactions, not account balances. One thing that might help is thinking about it differently: you're not really "withdrawing your original investment" - you're selling an asset that has appreciated in value. The $1350 you put in bought you shares of Apple stock, and now those shares are worth $1375. When you sell them, you're disposing of an asset for more than you paid, which creates taxable income. If you're really concerned about the tax reporting burden, you might consider just holding onto the stock for now if you don't urgently need the money. That way you avoid the taxable event entirely until you're ready to deal with the tax implications. But if you do need the cash, just know that reporting a $25 capital gain is pretty straightforward and won't add much complexity to your tax return.

One thing I haven't seen mentioned yet is that you might want to check if your state has any additional capital gains tax requirements. While the federal side is straightforward with reporting that $25 gain, some states have their own rules or forms for investment income. Also, if this is your first time dealing with investment taxes, it's worth noting that Robinhood usually makes their tax documents available by mid-February. You don't need to estimate or calculate anything yourself - they'll provide the exact figures you need for your tax return on the 1099-B form. The silver lining is that once you go through this process once, you'll understand how it works for future trades. And honestly, for a $25 gain, we're probably talking about $3-6 in actual taxes depending on your bracket, so the financial impact is pretty minimal even if the reporting requirement feels annoying.