Publication 550 (2023): Investment Income and Expenses

Publication 550 is your one-stop guide for understanding how the tax system treats your investment income and expenses.

What is Publication 550?

Publication 550, annually updated by the Internal Revenue Service (IRS), is a comprehensive guide for taxpayers on reporting investment income and expenses, including capital gains and losses, on their tax returns.

What does it cover?

A. Taxable investment income: This includes interest, dividends, capital gains (profits from selling investments), and other distributions, such as those from mutual funds.

B. Deductible investment expenses: These are costs associated with earning or managing investment income, such as interest paid on investment loans, investment fees, and certain safe deposit box fees.

C. Reporting capital gains and losses: This section explains how to calculate the gain or loss when selling investments, how to classify them as short-term or long-term, and how to report them on your tax return.

Who should use it?

Anyone who has investment income or expenses, including:

  • Individual investors who buy and sell stocks, bonds, and other investment property.
  • Shareholders of mutual funds and other regulated investment companies.
  • Individuals who pay interest on investment loans or incur other investment-related expenses.

Benefits of using Publication 550

  • Helps you understand your tax obligations: By understanding how investment income and expenses are treated by the IRS, you can avoid making mistakes on your tax return.
  • Reduces the risk of penalties: Knowing the rules can help you avoid penalties for underpaying your taxes or filing inaccurate information.

For the current year's Publication 550, click here.