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.
For those that don't know, trader tax status is a 'business' status for traders, who can then take advantage of business expenses and deductions related to their trading activity. (Tax Topics - Topic 429 Traders in Securities (Information for Form 1040 Filers) ().
Some of the benefits include: home office deduction, deductible trading expenses and fees, full trading loss deduction against income (as opposed to the $3000 cap) and others. Please visit the link provided for accurate (and official) information as I may have some of this wrong. Here is another resource for the potential benefits: Trader Status Benefits (
There are various interpretations of how to gain trader tax status, here are links to a couple of versions:
Trader Tax Status: How to Qualify | GreenTraderTax (
Trader Tax Status (
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.