Capital Gains and Losses

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I am setting up an investment account to day trade. Can I…

I am setting up an...
I am setting up an investment account to day trade. Can I write off all my cost associated with that business If I am a sole proprietor? Such as interest on a loan I took to open the account? Payments made on the loan each month etc. ? As well the expenses that are accrued like broker fees and e-room memberships etc.
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3/27/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Capital Gains and Losses
Satisfied Customers: 2,771
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Special rules apply if you're a trader in securities, in the business of buying and selling securities for your own account.

___

To be engaged in business as a trader in securities, you must meet all of the following conditions:

  • You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation;
  • Your activity must be substantial; and
  • You must carry on the activity with continuity and regularity.

___

Traders report their business expenses on Form 1040, Schedule C., Profit or Loss From Business (Sole Proprietorship).

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Customer reply replied 4 months ago
I meet that criteria , I am trying to minimize my tax burden .. Any suggestions

Commissions and other costs of acquiring or disposing of securities aren't deductible but must be used to figure gain or loss upon disposition of the securities.

____

Below is a link to IRS.Gov with additional information for traders in securities.

https://www.irs.gov/taxtopics/tc429

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To minimize your tax burden you should hold investments for at least one year.

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A trader who makes a timely mark-to-market election, can treat the gains and losses from sales of securities as ordinary gains and losses that must be reported on Part II of Form 4797.pdf, Sales of Business Property. Neither the limitations on capital losses nor the wash sale rules apply to traders using the mark-to-market method of accounting.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Capital Gains and Losses
Satisfied Customers: 2,771
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Chad EA, CDFA®, CFP® and 87 other Capital Gains and Losses Specialists are ready to help you
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Customer reply replied 4 months ago
I am doing equity options. In and out of each contract everyday. In determining my gains and losses which tax% bracket would I need to account for with that strategy ?
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I'm not sure, but it seems we are having a site/phone issue.

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The tax bracket you will use will depend on your overall net income.

2018 Tax Brackets

Single Tax Payer

Income Range ----- Tax Rate

$0- $9,525 ---- 10%

$9,925- $38,700 ---- 12%

$38,701- $82,500 ---- 22%

$82,501 - $157,500 ---- 24%

$157,501 - $200,000 ---- 32%

$200,001 - $500,000 ---- 35%

$500,000 - + ---- 37%

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Customer reply replied 4 months ago
Is there anyway to lower that bracket % by using an entity rather than me as a single payer ?
Customer reply replied 4 months ago
I will be doing around 100k profit a month

The only other option would be to form a corporation, which is taxed at a flat rate of 21% and distributions are also taxable, generally at 15%

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The corporation would be a separate taxable entity that is able to retain some earnings. However, you do have the issue of double taxation.

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Customer reply replied 4 months ago
Can I use an existing corp i have for that purpose.. Should it be an S or C-Corp ?
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