Tax Glossary

This glossary explains key tax terms you may see across your M1 Invest, Earn, and Borrow accounts, as well as in your tax documents and statements. Expanded definitions and practical examples are included to help you better understand your investment and tax reporting experience.

A–C | D–G | H–M | N–R | S–Z

The total of all your income for the year, minus certain deductions (such as IRA contributions or student loan interest). AGI is an important number used to determine tax liability and eligibility for tax credits.

A number that represents the total yearly cost of borrowing money, expressed as a percentage.

Example: If you borrow $1,000 at a 10% APR for one year, you’d pay $100 in interest.

Tax that must be withheld by the payer (such as a bank or brokerage) if you don’t provide a correct Tax Identification Number. This is reported on your M1 Invest and Spend tax forms if applicable.

Profit from selling a security for more than its purchase price. Appears on your monthly performance, tax documents, and trade confirmations.

Example: Bought a stock for $100, sold for $150, your capital gain is $50.

Loss from selling a security for less than its purchase price. Also found in tax documents and performance reports.

Example: Bought at $100, sold at $80; your capital loss is $20.

Money added to a retirement account (IRA or 401(k)). Contributions are reported on Form 5498.

The original price paid to buy a security, plus fees or commissions. Used to calculate gains or losses for taxes.

Example: Bought 10 shares at $20 each + $2 fee = $202 cost basis.

See: Explaining cost basis

A distribution of company profits to shareholders; may be paid in cash or additional shares.

Example: If you own 100 shares and receive a $0.50 dividend per share, your total dividend is $50.

Automatically using dividends to buy more shares rather than taking cash. Increases your total investment and cost basis.

A payout from a fund, retirement account, or other investment account. Distributions are reported on various 1099 forms.

Special withholding (usually 24%) if you don't provide a correct taxpayer ID or are subject to certain IRS notifications.

A tax form reporting the sale of stocks, ETFs, or other securities, including proceeds, date of the transaction, and cost basis.

You’ll see this in the Documents section of your M1 account and in your annual tax package.

Reports dividends and other distributions from investments over $10.

Example: Received $120 total in dividends in a year; appears on 1099-DIV Box 1a.

Documents interest income over $10 from sources like M1 Earn.

Used for miscellaneous compensation such as bonuses, referral incentives, and other non-investment income.

Reports retirement account distributions (withdrawals), including rollovers and conversions.

Details contributions and rollovers to retirement accounts.

The time you own a security before selling. Used to categorize capital gains/losses as short or long term.

Payment made monthly at a particular rate.

Describes assets held for more than one year before being sold. Long-term capital gains are typically taxed at a lower rate.

AGI plus certain tax deductions added back. Used to determine IRA contribution limits, eligibility for Roth IRAs, and other tax breaks.

Funds borrowed from M1 using eligible investments as collateral. Interest is calculated using a margin rate (see your Borrow dashboard for current rates).

Money received that does not fit into other 1099 categories, such as transfer or referral bonuses.

Income or dividends taxed at ordinary income tax rates.

The annual interest rate for personal loans, based on creditworthiness and loan terms.

A dividend that meets IRS criteria for lower tax rates, often substantially less than regular (non-qualified) dividends.

Refers to capital assets or transactions held for one year or less, which are taxed at higher, ordinary income rates.

Strategy to sell investments at a loss to offset gains or reduce taxable income, potentially lowering your tax bill.

Example: Sold one stock for a $500 gain and another for a $400 loss, you only pay taxes on $100 net gain.

Refers to sales where cost basis is unknown or missing—often the case for securities transferred from another brokerage without a full transaction history.

M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.

All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.

Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.

This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.

M1 disclosures here.

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