New to investing, do I have to pay taxes on my ETF's interest or just when I sell it?

Question

I recently bought one share of VUG (ETF) and it's not doing so bad so far, I made a profit of roughly 2 dollars. Do I file this in tax somewhere? Or do I only file if I sell the thing.
I can't find any helpful information on the internet.
Thanks in advance.

JohnFx · Accepted Answer

You only owe capital gains  when you realize the profits. That is, you will owe taxes for any gains in the tax year that you sell it.  You would report the gains on your tax forms and calculate the tax owed then.
One caveat (thanks @justin cave): If the ETF pays dividends, you will owe taxes on those in the year they were paid out regardless of whether you kept or sold the underlying investment.

D Stanley · Answer

In a non-tax-sheltered (i.e. retirement) account, you will possibly owe taxes on capital gains when you sell the investment for a profit, and "distributions", which may be classified as capital gains, dividends, etc.
I say possibly because those gains can be offset by losses in other investments during the same tax year. After the year is over, your broker should send you one or more "1099" statements that summarize the total taxable events for the year. You'll use that statement to fill out your income tax forms (or enter in the data to whatever tax software you use).
All that to say that you don't need to worry about paying taxes now until you start getting massive gains or dividends (thousands of dollars) that may require you to pay quarterly estimated taxes.

New to investing, do I have to pay taxes on my ETF's interest or just when I sell it?

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