12% short-term capital gains MA State Tax

Thanks for all the responses.

The combination of NH's 0% state taxes plus the high cost of health insurance for self-employed individuals in MA make NH pretty attractive. But I have a network/family in Boston which is I why I'm moving to that area in the first place.

I spoke to a Massachussets cpa friend who happens to have a large day trader as a current client (who, he told me, lost 1 mil. dollar in 2006 (holy $@#!)). This cpa said that if the short term capital gains income is my full-time primary source of income, then the 12% does not apply, and I just pay the regular MA State Tax rate on the income. That sounds ideal to me but he didn't elaborate on specifics.

Anyone know about this exemption?
 
it would seem - i f you go that route then -- you are calling your gains from trading ---- income.

Calling it income - causes you to pay self employment fica. Which is what - 15% on the first ________ thousand

as i warned earlier- not many cpas have explored the irs code regarding gains vs income for full time traders. The ones that have in Chicago are used to working with floor traders. The ones in new york are used to working with dealers.

However, if you have consistently substantial income - you may wish to pay the fica, call it income, and then fund your retirement account - which you could trade tax free.
 
Good point. I'm going to check with the cpa on that. I will have to see if avoiding the 12% short term capital gains tax is possible if one submits a k-1 and pays no FICA. If I can only avoid the 12% by submitting a 1099 and paying the 15% fica, then the situation is looking kind of crappy for MA.

Although I haven't crunched the numbers, I've heard that if you max out retirement contributions, then for certain ranges of earned income the total effective tax rate when submitting a 1099 is not that different to what you get when you submit a k-1.

But any difference in effective tax rate (with respect to 1099 vs. k-1) plus NH's 0% tax rate (vs. 5-6% in MA) add up to make a significant difference, I think.

We'll see what the cpa says.
 
Hey, Bouncy -

What did you end up deciding re: MA and taxes? I trade in MA and have been simply taking it as ST cap gains. My accountant doesn't seem too up on it, and I'd love to know if there's a better approach.
 
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