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The Tax Thread
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The Tax Thread

  #161 (permalink)
Market Wizard
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mdsvtr View Post
As far as the Percentage of Gains from trading ( Stocks, Forex, Options ) , combining all profits and from all instruments traded,
If you made say $10,000 for the year 2014 , would holding 20% ( $2,000 ) be enough to cover your Capital gains tax , or is it more in the 25 - 30% percent range ?

I know about the 60/40 rule, I'm just trying to make sure I apply it correctly, and hold out extra for taxes from here on out , as to not have it come back to bite me Tax time of this year.

Thanks for the help

Depends entirely upon what your adjusted gross income (AGI) (aka your tax bracket) is for the year. If you make $1 million then no you'll probably pay more. If that is your only income then you may not own any tax at all.


SMCJB View Post
Equities & Equity Options held for less than 1 year = Short Term Capital Gains = Your Individual Tax Rate (0% to 39.6%)
Equities & Equity Options held longer than 1 year = Long Term Capital Gains = 0% to 20% depending on your Tax Bracket

Individual Tax Brackets
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Married Tax Bracket
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Disclaimer. I'm not an accountant, I'm a trader, hence this is only my understanding and while I believe it to be accurate it may be incorrect.

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  #162 (permalink)
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SMCJB ,
Thanks so much for posting this

This is exactly the information i was looking for

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  #163 (permalink)
Elite Member
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trader tax status


I have a question specifically about trader tax status. I started another thread for that specific sub-topic here:
https://futures.io/elite-circle/34499-trader-tax-status.html#post465302

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  #164 (permalink)
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The Obamacare Tax Shock That Could Have You Pulling Your Hair Out

The Obamacare Tax Shock That Could Have You Pulling Your Hair Out

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  #165 (permalink)
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opinions on trader tax status?

I'm wondering how many traders here have or are seeking 'trader tax status' and how the requirements for acquiring that status have effected (affected?) their trading.

The reason I bring this up is that it seems to me some of the things you have to do to qualify for trader tax status, or trading as a business, are actually counter productive to running a successful (profitable) trading business. One example is the 'requirement' for a minimum number of trades per year. This encourages over trading, especially if you're not a scalper who takes several round turns a day. Swing traders may be out of luck, both on the number of trades criteria and the duration of the trade criteria.

I know that each case is different, but I'd like to get a feeling of how many traders have found the requirements worth it for the business deductions and have been able to trade profitably within the IRS guidelines.

I'm leaning toward seeking trader tax status for the deductions and to re-enforce (in my own mind at least) that my trading activity is a business and should be treated that way, not just a hobby that I can fiddle around with.

What are your thoughts, opinions, comments?

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  #166 (permalink)
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cts001 View Post
I'm wondering how many traders here have or are seeking 'trader tax status' and how the requirements for acquiring that status have effected (affected?) their trading.

The reason I bring this up is that it seems to me some of the things you have to do to qualify for trader tax status, or trading as a business, are actually counter productive to running a successful (profitable) trading business. One example is the 'requirement' for a minimum number of trades per year. This encourages over trading, especially if you're not a scalper who takes several round turns a day. Swing traders may be out of luck, both on the number of trades criteria and the duration of the trade criteria.

I know that each case is different, but I'd like to get a feeling of how many traders have found the requirements worth it for the business deductions and have been able to trade profitably within the IRS guidelines.

I'm leaning toward seeking trader tax status for the deductions and to re-enforce (in my own mind at least) that my trading activity is a business and should be treated that way, not just a hobby that I can fiddle around with.

What are your thoughts, opinions, comments?

I figure up my taxes both ways (actually about 4 different ways) each year and then decide. You don't have to claim trader status until you file your return.

2014 was my 3rd full year with trading as my only income and I haven't claimed trader status yet.

This will be different for each and every trader based on your personal situation.

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  #167 (permalink)
Market Wizard
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cts001 View Post
I'm wondering how many traders here have or are seeking 'trader tax status' and how the requirements for acquiring that status have effected (affected?) their trading.

I've filed using trader tax status for 5 consecutive years. For me the big benefit is being able to fully deduct, servers, hosting, software and other business expenses.
I trade 250 days a year and execute thousands of trades so qualifying is not difficult for me.

cts001 View Post
The reason I bring this up is that it seems to me some of the things you have to do to qualify for trader tax status, or trading as a business, are actually counter productive to running a successful (profitable) trading business. One example is the 'requirement' for a minimum number of trades per year. This encourages over trading, especially if you're not a scalper who takes several round turns a day. Swing traders may be out of luck, both on the number of trades criteria and the duration of the trade criteria.

I believe the intent of the rule is to differentiate between people who trade for a business as opposed to people who trade part time and/or people who invest rather than trade.
Obviously the dividing line between the 3 can be highly debatable, but I guess they had to start somewhere.
While you do mention the trade frequency requirement Green Trader Tax lists several other desired requirements to qualify including
- Regular: Trades full-time or part-time for a good part of the day, almost every day.
- Frequent: Executes trades on more than 75% of available trading days. Thatís close to four days per week.
- Continuous: Has few to no sporadic lapses in the trading business during the year. One month on and one month off is not acceptable.
- Time: Spends more than four hours per day, almost every market day working on his trading business.
- Daily market movements: Makes mostly day trades or swing trades with average holding periods under a few weeks on equities and no more than 30 days on options.
- Intention: Has the intention to run a business and make a living. It doesnít have to be a ďprimaryĒ living and you can have perennial losses as the hobby-loss rules donít apply to a trading business.
Do you qualify for all of these?

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  #168 (permalink)
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Yes, I meet all qualifications for trader tax status. I only mentioned a couple because they seem counter productive. If I was selling Avon, I would not have to meet these kinds of test (imagine having to make an average of 2-3 sales per day...)

I think there are a lot of 'traders' who do not opt for trader tax status but instead run an education or mentoring business that happens to deal with trading (or something like that) in order to have business tax advantages and not have to meet some of the specific requirements for trader tax status. I'm not in a position to do that.

Just trying to see if most of those who qualify for 'trader tax status' are filing for it and if it is hard to maintain or not given a particular trading style.

Thanks for the replies.

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  #169 (permalink)
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cartoon of the day

After all, it's what you learn AFTER you know it all, that counts!
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  #170 (permalink)
Market Wizard
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Forbes: Tax Treatment Of Forex Losses In Wake Of Swiss Surprise


Forbes: Tax Treatment Of Forex Losses In Wake Of Swiss Surprise
by Robert Green of Green Trader Tax

If you are one of many who got caught on the wrong side of the forex trade when the Swiss National Bank (SNB) surprised the markets with a huge policy change this week, you probably incurred significant losses. Hereís a quick primer on how to handle these losses on your tax returns. First, itís important to segregate your losses into two camps .....

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