Does anyone know the tax implications related to day-trading? It day-trading is your primary means of income, what are the taxes on your earnings? thanks.
I’m not sure about this, but if you declare investing as your primary source of income it will be treated as such (meaning you don’t get the cap gains benefits), but you can right off more things against your income. From what I’ve heard once you go down this path its very hard to switch back to investment income being treated as cap gain, div etc… You should prob talk to an CA / CPA for some advice.
It’s just short-term capital gains (ie., same as income) unless you use sec [1281?, whatever] investments like futures contrcts that give you 60/40 treatment.
is there a max % that can be taxed…like 35% on all your profits?
Nope. 100% short term cap gains. That schedule D will get real long too depending on how active you were too. You are allowed to deduct losses from your gains though.
Nope. 100% short term cap gains. That schedule D will get real long too depending on how active you were too. You are allowed to deduct losses from your gains though.
so let’s say you start with 15K and you grow it to 100k in one year…hypothetically, what could you expect to pay in taxes?
85k ordinary income which will be taxed at your income bracket. Probably 35% or so. $85,000 x .35 = 29,750 in taxes.
that’s what i thought. thanks guys.
KJH Wrote: ------------------------------------------------------- > 85k ordinary income which will be taxed at your > income bracket. Probably 35% or so. > > $85,000 x .35 = 29,750 in taxes. This is a horrible way to calculate this. The taxes due on 85k would only be just under $18,000 (assuming a single filer). $85,000 of taxable income is only the 28% bracket, plus that is only the highest amounts taxed at that rate. Much of the income would be taxed at 10%, 15, and 25% before you got to 28%. Plus, you would have all of your deductible expenses and exemptions to claim on your tax return that could potentially push your tax bill much lower.
You might want to talk to a pro. If you start to treat it as a business to take deductions you might get hit for self-employment tax, social security, etc.
Yes, if you are a self-employed trader, you can deduct from that 85k any equipment costs, data subscription fees, research materials, and potentially CFA study costs. You get taxed for social security as well, but half of those taxes are deductable against your AGI for regular income tax. Plus, you can shift some of that profit into a Roth IRA or SEP plan, and invest that part tax free (you just can’t access it until you’re old enough to retire)
braves fan Wrote: ------------------------------------------------------- > KJH Wrote: > -------------------------------------------------- > ----- > > 85k ordinary income which will be taxed at your > > income bracket. Probably 35% or so. > > > > $85,000 x .35 = 29,750 in taxes. > > > This is a horrible way to calculate this. The > taxes due on 85k would only be just under $18,000 > (assuming a single filer). $85,000 of taxable > income is only the 28% bracket, plus that is only > the highest amounts taxed at that rate. Much of > the income would be taxed at 10%, 15, and 25% > before you got to 28%. Plus, you would have all > of your deductible expenses and exemptions to > claim on your tax return that could potentially > push your tax bill much lower. Agreed. I simply didn’t bother to look up the effective tax bracket. You are correct though.
I think you need to declare yourself as a trader first by filing some forms before treating it like a business. There should be some books talking about this. Also by declaring as trader, you do not have to follow wash sale rule, etc.