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Earn Tax-Free Passive Income in the Stock Market

Miguel A. Calles
The Startup
Published in
5 min readDec 17, 2024

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This picture of a piggy bank and a 100 dollar bill was generated by Microsoft Copilot.

In late 2021, I discovered a stock ticker family that provides high-yielding dividend returns—10% yearly. I decided to invest some money in these investments.

I started investing in these stocks in early 2022. Unfortunately, I failed to realize that the stock market was going into a bear market. When it became apparent that we were in a bear market, I had already invested several thousand dollars. Fortunately, while the NASDAQ and S&P 500 were down over 20%, these investments were down about 10% to 15%.

Although upset with myself, I decided to reinvest the dividends to offset the losses with dollar-cost averaging. Every reinvested dividend payment would have a lower entry price than my initial investment. The following month, that dividend reinvestment would earn a higher dividend payment rate since I had more shares per invested dollar than my initial investments. The initial investment loss took about two years to recover since a bull market followed in late 2022. Meanwhile, the dividend payments were growing in value.

I was worried about my tax liability in early 2023. I had reinvested the dividend payments and did not have extra cash to pay the taxes on those earnings—or so I thought. When I filed my taxes, I noticed my tax liability did not increase, and I wanted to know why. The 1099-DIV form classified…

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The Startup
The Startup

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Miguel A. Calles
Miguel A. Calles

Written by Miguel A. Calles

Author of Mastering AWS Serverless · AWS Community Builder · Specializing in CMMC, SOC 2, serverless & engineering.

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