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A pending transaction on your bank account means that a transaction is underway but hasn’t been fully processed yet. Perhaps a vendor has accepted your debit card as payment and is working with your bank to receive payment. Or maybe you are expecting an electronic payment but the funds are awaiting release.

Usually, your bank takes a few business days to resolve the pending transaction and post it to your account. However, it’s vital to remember that pending transactions subtract your purchase amount from your bank account as soon as they appear. Likewise, an incoming credit will turn up as an addition to your balance, usually with an anticipated release date.

Bank pending transactions, even if they come from vendors you recognize, may require a closer look. For instance, why is there an extra charge from the gas station you visited this morning? And why would a charge still be pending from the sandwich shop you stopped at last week? These items are examples of pending transactions, which can create holds on your account until your bank resolves them.

What Is a Pending Transaction?

A pending transaction on your bank account means your bank is processing a purchase you made, a bill you paid, or a deposit that’s heading your way, but it hasn’t been completed yet. Either the payment hasn’t been sent to the vendor yet or the incoming funds haven’t cleared, although they are in process.

For instance, when you purchase a good or service by using your debit card, your account will show a pending transaction shortly after. This acknowledges that you used your card, shows the amount, but the transaction isn’t in the rearview mirror just yet. Here’s why:

•   Pending purchases happen when you swipe, insert, or tap your card, the business you’re transacting with confirms the card is valid through a quick online process.

•   Then, the business accepts the purchase and puts a hold on your account, signifying that your bank needs to pay them for the purchase. This hold creates a pending transaction on your checking account.

•   The business resolves the pending transaction on your account by settling your purchase with your bank or financial institution. When your financial institution receives communication from the business, it will perform a bank transaction deposit to the business’s financial account.

•   Once the business receives payment, the transaction goes from pending to posted.

Likewise, pending deposits happen when the funds from another account haven’t been released to your bank account yet. However, they appear pending to let you know funds are processing and should be deposited soon. This could reflect a check you deposited or perhaps a direct deposit that you set up.

How long do direct deposits take to clear? Typically, direct deposits can take a couple of days to clear, but paychecks are often orchestrated in advance to show up and be available on payday, so they may appear instantaneous.

If you’ve deposited a check, it typically takes no more than two days to clear, but in some situations, it can take up to a week.

Recommended: What Happens if a Direct Deposit Goes to a Closed Account?

Pending Transaction vs Posted Transaction

A bank pending transaction and a posted transaction represent two different stages of your bank or financial institution processing a payment or a deposit. Specifically, the difference is:

•   A pending transaction on your bank account means one of two things: either a merchant initiated a request for payment to your bank because of a purchase you made with your debit card or a deposit is waiting to be released into your account.

•   To get to posted transaction status, your bank finishes processing the payment or deposit request, and money goes from your account to the vendor to fund your purchase or vice versa. For example, say you spend $50 at the grocery store. After you use your card, the store communicates with your bank to record a pending transaction. Then, your bank uses funds in your account to fulfill your grocery purchase. Your account has a posted transaction, a debit, of $50 after your bank pays the grocery store.

How Long Does a Transaction Stay Pending?

A transaction typically stays pending for one to three business days. During this time, your bank or financial institution processes the request and transfers money from one account to another according to your purchase or deposit amount.

After these steps occur, the transaction is no longer pending. It becomes a posted transaction.

What Causes a Transaction to Stay Pending?

A transaction can stay pending for various reasons.

•   First, the vendor you transacted with might be slow to move the payment from your bank. The transaction stays pending until the vendor accepts payment from your bank. If the vendor takes too long to accept the money, the bank can cancel the transfer. If that happens, the pending transaction will vanish from your account, along with the charge against your balance.

•   In addition, pending transactions can take longer to clear because of how businesses operate in specific industries. For example, a hotel won’t resolve a pending transaction on your account until you check out because you might, say, order room service during your stay, increasing your bill. As a result, the pending transaction stays on your account until the hotel can charge the grand total to your card.

•   Lastly, transactions can stay pending because of holidays and weekends. During these times, banks and businesses may take longer to resolve pending transactions on your account.

How Does a Pending Transaction Impact Your Account Balance?

Although a pending transaction on your bank account means the vendor hasn’t received payment yet or the funds for the deposit are not cleared, it still influences your account balance. Put another way, pending transactions count toward your balance, which helps prevent you from overspending money.

There’s another benefit to this practice: That quick deduction of pending charges from your bank account balance might help you avoid overdraft or NSF fees. You see how much money is actually in your account and can therefore be cautious with your purchases.

Pending Transaction Examples

Say you have $2,000 in your bank account, and you go to buy a $400 espresso machine. The merchant initiates a hold with your bank account, and your bank creates a $400 pending transaction on your account. This transaction reduces your account balance by $400.

Meanwhile, the bank takes four days to process the merchant’s request. However, the moment the pending transaction hit your account, your balance changed to $1,600. As a result, you had a realistic sense of the money available to spend immediately after buying the espresso machine despite your bank taking four days to pay the merchant.

In other words, the bank pending transaction is instantly subtracted from your bank account to prevent you from overdrafting. So, when managing your checking account, your balance might be lower than expected from time to time. In these situations, check for pending transactions from recent purchases, as they may be taking away from your balance sooner than you thought.

Can You Cancel a Pending Transaction?

Depending on where you are in the purchase process, you may be able to cancel a pending transaction with the vendor or your bank. Here are a few scenarios to consider. First, here’s how you might be able to work with a vendor:

•   Perhaps you place an online order for new clothes and feel buyer’s remorse a few hours later when you see the pending transaction hit your bank account. Fortunately, the vendor probably hasn’t shipped your order yet, so you contact them and cancel the order. Once your vendor processes the cancellation, the pending transaction should disappear from your bank account and restore your available funds.

•   What if you placed an online order, but you notice the pending transaction on your bank account is double the amount of what you actually ordered? You realize the vendor has charged your account twice, so you notify them about the issue. Once they rectify the ordering error, the pending transaction should change to the correct amount.

In other situations, contacting your bank or financial institution is a better move.

•   If you see an unfamiliar pending transaction from a company you don’t remember doing business with, it’s best to notify your bank of the suspicious activity. The bank will investigate on your behalf and cancel any fraudulent charges.

•   If you see a pending transaction for an amount that doesn’t match your records, you can ask your bank to nullify the charge. This option is helpful if you can’t get in touch with the vendor or want to avoid overdrafting your account.

•   Say you have a pending transaction from a business that is unresponsive to your communication or refuses to cancel the transaction. In that case, contacting your bank to cancel the pending transaction can resolve the issue.

Recommended: Benefits of Using Mobile Deposit

The Takeaway

A pending transaction on your bank account means your bank is processing a purchase or an incoming deposit from another account. Although a pending transaction signifies your vendor has yet to receive payment or the deposit funds aren’t released yet, the amount involved is typically reflected from your bank account. This gives you an accurate, up-to-date picture of the money you have available.

It’s possible to cancel a pending transaction by contacting the vendor or your bank, but it’s crucial to act quickly.

Looking for a banking partner that makes money management easy and rewarding? Open an online bank account with SoFi. Our high interest bank account offers a competitive annual percentage yield (APY) and no account fees, both of which can help your money grow. We also have features like Vaults and Roundups that can help take your savings to the next level. Plus, the fact that you spend and save in one convenient place can streamline the time you spend wrangling your finances.

FAQ

Are pending transactions already deducted from my account?

Once a pending transaction appears on your bank account, the amount is deducted from your balance. As a result, you don’t have to wait for the transaction to post to see how the purchase impacts your bank account.

What do I do if my transaction is pending?

If your transaction is pending, all you need to do is wait for your bank to resolve the charge with the vendor or the deposit to your account. This process usually takes one to three business days. The only reason to take action regarding a pending transaction is if you want to cancel it.

Can pending transactions be declined?

A vendor can decline a pending transaction by not accepting payment from your bank. This scenario means the vendor loses money on your purchase, so it’s rare for this to happen (unless, say, an item is sold out). The vendor will also decline a pending transaction if you successfully cancel your order with them.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

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SOBK0223017

Investors usually need to pay taxes on their stocks when and if they sell them, assuming they’ve accrued a capital gain (or profit) from the sale. But there are other circumstances when stock holdings may generate a tax liability for an investor, too. This is important for investors to understand so that they can plan for the tax implications of their investment strategy. Knowing how your investments could impact your taxes may better prepare you for tax season and allow you to make more informed investment decisions.

First, an important note: The following should not be considered tax advice. Below, you’ll learn about some tax guidelines, but to fully understand the implications, it’s wise to consult a tax professional.

Do You Have to Pay Taxes on Stocks?

Do you need to pay taxes on stocks? It depends. Typically, as mentioned, investors would need to pay capital gains taxes when they sell a stock – the sale of which triggers a taxable event. But broadly speaking, yes, investors need to pay taxes on their stock holdings. The main question and what investors need to figure out, is when do you need to pay taxes on stocks, and what other actions or incidences, besides a sale, could trigger a taxable event.

When Do You Pay Taxes on Stocks?

There are several scenarios in which you may owe taxes related to the stocks you hold in an investment account. The most well known is the tax liability incurred when you sell a stock that has appreciated in value since you purchased it. The difference in value is referred to as a capital gain. When you have capital gains, you must pay taxes on those earnings.

Capital gains even have their own special tax levels and rules. To get a sense of what you might owe after selling a stock, you’d need to check the capital gains tax rate – more on that below.

You will only owe capital gains taxes if your investments are sold for more than you paid for them (you turn a profit from the sale). That’s important to consider – especially if you’re trying to get a sense of taxes and ROI on your investments, with taxes taken into account.

There are two types of capital gains tax:

Short-term Capital Gains

Short-term capital gains tax applies when you sell an asset that you owned for less than one year, and that gained in value within that time frame. These gains would be taxed at the same rate as your typical tax bracket, so they’re important for day traders to consider.

Long-term Capital Gains

Long-term capital gains tax applies when you sell an asset that gained in value after holding it for more than a year. Depending on your taxable income and tax filing status, you’d be taxed at one of these three rates: 0%, 15%, or 20%. Overall, long-term capital gains tax rates are typically lower than those on short-term capital gains.

Capital Losses

If you sell a stock for less than you purchased it, the difference is called a capital loss. You can deduct your capital losses from your capital gains each year, and offset the amount in taxes you owe on your capital gains.

You can also apply up to $3,000 in investment losses to offset regular income taxes.

Tax-loss Harvesting

The process mentioned above – which involves deducting capital losses from your capital gains to secure tax savings – is called tax-loss harvesting. It’s a common technique often used near the end of the calendar year to try and minimize an investor’s tax liability.

Tax-loss harvesting is also commonly used as a part of a tax-efficient investing strategy. It may be worth speaking with a financial professional to get a better idea of whether it’s a good strategy for your specific situation.


💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Taxes on Investment Income

You may have taxes related to your stock investments even when you don’t sell them. This holds true in the event that the investments generate income.

Dividends

You may receive periodic dividends from some of your stocks when the company you’ve invested in earns a profit. If the dividends you earn add up to a large amount, you may be required to pay taxes on those earnings. Each year, you will receive a 1099-DIV tax form for each stock or investment from which you received dividends. These forms will help you determine how much in taxes you owe.

There are two broad categories of dividends: qualified or nonqualified/ordinary. The IRS taxes non-qualified dividends at your regular income tax bracket. The rate on qualified dividends may be 0%, 15%, or 20%, depending on your filing status and taxable income. This rate is usually less than the one for nonqualified dividends, though those with a higher income typically pay a higher tax rate on dividends.

Interest Income

This money can come from brokerage account interest or from bond/mutual fund interest, as two examples, and it is taxed at your ordinary income level. Municipal bonds are an exception because they’re exempt from federal taxes and, if issued from your state, may be exempt from state taxes, as well.

Net Investment Income Tax (NIIT)

Also called the Medicare tax, this is a flat rate investment income tax of 3.8% for taxpayers whose adjusted gross income exceeds $200,000 for single filers or $250,000 for filers filing jointly. Taxpayers who qualify may owe interest on the following types of investment income, among others: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities.

Recommended: Investment Tax Rules Every Investor Should Know

When Do I Not Have to Pay Taxes on Stocks?

Again, this should first and foremost be a discussion you have with your tax professional. But there are a few situations you should know about where you often don’t pay taxes when selling a stock. For example, if you are investing through a tax-deferred retirement investment account like an IRA or a 401(k), you won’t have to pay taxes on any gains when you buy and sell stocks inside the account. However, if you were to sell stock in one of these accounts and then withdraw it, you could owe taxes on the withdrawal.

4 Strategies To Pay Lower Taxes on Stocks

If the answer to “Do you have to pay taxes on stocks?” is “yes” for your personal financial situation, then the question becomes how to pay a lower amount of taxes. Strategies can include:

Buy and Hold

Holding on to stocks long enough for dividends to become qualified and for any capital gains tax to be in the long-term category because they are typically taxed at a lower rate.

Tax-loss Harvesting

As discussed, utilizing a tax-loss harvesting strategy can help you with offsetting your capital gains with capital losses.

Use Tax-advantaged Accounts

Putting your investments into retirement accounts or other tax-advantaged accounts may help lower your tax liabilities.

Refrain From Taking Early Withdrawals

Avoiding the temptation to make early withdrawals from your 401(k) or other retirement accounts.

Taxes for Other Investments

Here’s a short rundown of the types of taxes to be aware of in regards to investments outside of stocks.

Mutual Funds

Mutual funds come in all sorts of different types, and owning mutual fund shares may involve tax liabilities for dividend income, as well as capital gains. Ultimately, an investor’s tax liability will depend on the type and amount of distribution they receive from the mutual fund, and if or when they sell their shares.

Property

“Property” is a broad category, and can include assets like real estate. The IRS looks at property all the same, however, from a taxation standpoint. In short, property is subject to capital gains taxes (not to be confused with “property taxes,” which are something else entirely. In effect, if you buy a house and later sell it for a profit, that gain would be subject to capital gains taxes.

Options

Taxes on options trading can be confusing, and tax liabilities will depend on the type of options an investor has traded. But generally speaking, capital gains taxes apply to options trading activity – it may be wise to consult with a financial professional for more details.

Investing With SoFi

For most investors, paying taxes on stocks involves paying capital gains taxes after they sell their holdings, or paying income tax on dividends. But it’s important to keep in mind that the tax implications of your investments will vary depending on the types of investments in your portfolio and the accounts you use, among other factors.

That’s why it may be worthwhile to work with an experienced accountant and a financial advisor who can help you understand and manage the complexities of different tax scenarios.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

How much do you pay taxes on stocks?

How much an investor pays in taxes on stocks depends on several factors, including any applicable capital gain, how long they held the stock, and whether they received any income from the stock, such as dividend distributions.

Do you get taxed when you sell stocks?

Yes, investors do generate a tax liability when they sell a stock in the form of capital gains taxes. If the investor has generated a capital loss as the result of a sale, they can use it to offset tax liabilities generated by other capital gains.

How do you avoid taxes on stocks?

There are several strategies that investors can use to try and avoid or minimize taxes on stocks, including utilizing a buy-and-hold strategy, opting not to take early withdrawals, and utilizing tax-advantaged accounts.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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