are free stocks taxable
October 11, 2021

Are Webull Free Stocks Taxable?

Personal Taxes

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I got a question from Fighting Ducks who asked me, “Logan, I have one of those free stocks that was given for signing up to use an app. It is less than $5. Do I need to claim that on my taxes?”

And I asked him which app and he said Webull. Webull is constantly running these promotions where if you sign up you get free stock and if you deposit a certain amount, usually one hundred dollars, you get even more free stock, if you haven’t done this yet, my Webull link is in the description, support the channel, yay, also check out the video where I list out eleven places where you can get free stock right now, the link to that video is down in the description as well.

So the answer to Fighting Duck’s question is yes, you need to report this on your taxes, this is income to you and this goes for other platforms that give you free stock as well. How do you know what this amount is? It is the closing price of the stock on the day that your stock was actually delivered to your account.

The value is not the estimated value that Webull tells you in the “My Free Stock” section of your account, so just to show you what that estimated value is not so you’re not confused, if you go to your account, click “Menu” in the bottom right, and then click “My Free Stock”, you will see the free stock that Webull has deposited into your account and in the box with each free stock it tells you the estimated value of the stock when it was deposited. So for example here, I received CWH free stock on January Seventeenth, I don’t even know what that is, what is that, Camping World Holdings, “Camping World Holdings, Inc. is an American corporation specializing in selling recreational vehicles, recreational vehicle parts, and recreational vehicle service. They also sell supplies for camping. The company has its headquarters in Lincolnshire, Illinois.”

And then in the upper right corner of this little CWH box it says estimated value thirty-one dollars and eleven cents. That number is just that, an estimated value, that’s not the actual value of the stock when it was delivered to you, that appears to be the value of the stock at the time you claimed your free stock in the Webull app, which is obviously before the stock is actually delivered to you.

However, if you download your tax document for the year, which you can do by logging into your Webull account, clicking the account button at the bottom, entering your trading password, clicking more, then scrolling down to under “Document” click “Tax Document” and open your tax document for last year 2020, then scroll down to the page that says “Miscellaneous Income – Details of Form 1099-Miscellaneous”.

This form is basically a listing of your free stocks from Webull. And so the amount you see at the bottom, the sum, for Other Income (Box 3), and you may have something in the column for Box 8 as well, the sum of these amounts you will include on your tax return. Where? So, this is not tax advice, but basically you have to determine if you earned this income in the course of a trade or business or not, and that will determine where to report this amount on your tax return.

If the only free stocks you received from Webull were the free stock you received for opening your account, the free stock you received for making your initial deposit of a hundred dollars or more, and maybe some free stock you received for referring a free friends, in that situation, you’re not running a business there, you would report the amount from your Webull 1099-Miscellaneous on Form 1040, Schedule 1, Part 1, Line 8, which when summed with other other income items would flow to Form 1040, Line 8.

However, if you earned Webull free stock in the course of a trade or business, you have a YouTube channel where you talk stocks and you say, hey, use my Webull link for free stocks, and people do that, and you get free stocks from Webull, in that case I would say that you should include your Webull free stock income per the 1099 on Schedule C, Part 1, Line 1, gross receipts or sales from your business, along with your other business receipts and sales for that particular business.

Now, this matters because the amount reported as “Other Income” that flows directly to Form 1040, Line 8, that amount is not subject to self-employment tax but amounts on Schedule C are because they’re part of your self-employment income. Now, if you really want to save some self-employment taxes, I don’t think it would be too aggressive for you to put the two or four or whatever stocks you received for signing up for Webull as “Other Income” that flows to Form 1040, Line 8, and the amount you received as referral bonuses from your YouTube or Instagram or whatever on Schedule C, kinda split it up that way.

Now, Webull is technically only required to file a 1099 like this if they paid you at least $600 worth of free stock from them. However, Webull confirmed to me in an email that even if your referrals are less than $600, they will still report it to you on the Form 1099-Miscellaneous, so I want to know, is that true? For those of you who received less than $600 worth of free stock from Webull last year, you only received two or four shares of relatively low-priced stock last year, let me know, did Webull still include a Form 1099-Miscellaneous in your tax document for the year showing the reportable amount of free stock you received even though it was under the six hundred dollar threshold?

Let me know in the comments because I’m super curious about that and also if you haven’t yet seen my full TurboTax walkthrough for 2021, be sure to check that out, on the following screen there will be a link you can press to watch my TurboTax walkthrough and review for 2021 and if you’ve already seen that one, be sure to check out my review for the M1 Finance investment platform, this is an investment platform that I am starting to use more and more to just put more and more money in the market everyday.

Author:

Logan Allec, CPA

Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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