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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I have a questions I want to ask you about taxation in the

Customer Question

Hello I have a questions I want to ask you about taxation in the US. Recently, I notice many US citizens used binary options from overseas to earn some money. So, my question is is it legal for a US citizen to trade overseas with a regulated broker or not since certain brokers accept US traders? Also, will the profits earned from trading oversea, will that be count as income where it need to tax. If so, how will it be taxed in the US and where the information need to be included in the tax return? I hope you can answer these questions for me truthfully and clearly.
In addition, can we deduct any losses or take a foreign deduction? If so how much? And do I have to pay more tax to the government if I earn more money from trading? If so, what is the tax rate for the income level. Furthermore, will I have to pay FICA taxes and any other additional taxes if I trade from an oversea broker?
Submitted: 13 days ago.
Category: Tax
Expert:  emc011075 replied 13 days ago.

Hi. My name is ***** ***** I will be happy to help you.

US citizens and residents are required to report their worldwide income, regardless where or how it is earned. It is perfectly legal to trade overseas as long as all income is properly reported. The profits from trades are treated as capital gains income and will need to be included on US tax return. If the same income had been already taxed by foreign government, the individual can claim credit for foreign taxes paid. Long term capital gains are taxed at reduced rate, depending on individual's total income, usually at 15%. Losses can be deducted however, there's limit of 3K capital gains loss per year. More losses will have to be carried forward to future years.

There are no FICA taxes, but the individual may be subject to additional Medicare tax, if his income total income is over certain threshold.

Expert:  emc011075 replied 13 days ago.

Any questions?

There's really no big difference between domestic or foreign trades. It is all capital gains. The only difference is the credit for foreign taxes paid and most brokers will issue you the proper tax statement to report it.