Deducting Trading Expenses

Andy,

I suggest you take a look at this site http://www.greentradertax.com/section1256.htm in addition to the links I posted earlier in this thread.
Green have some guides on tax treatment for stock and futures traders. They are fairly priced and would be tax deductible.
In terms of deducting expenses, assuming you qualify as a trader you can deduct all the expenses that you had listed and more.

Stuart
 
Andy4,

If you are a profitable emini trader you DO NOT want to claim M to M. You lose the 60/40 gain tax split from futures.
 
Quote from andy4:

Hi All,

hope you don't mind me adding a question or two. I know I need to verify any answers with a accountant.

Pretty much all I trade are the e-minis. Ib gives me "one nice :-)" slip at the end of the year, just profit or loss. Which is, to me another great reason to trade the e-minis. Can't remember the name/number at this time.

I don't/have not selected M to M or set up any kind of business, yet.

Questions,

Where do I declare the form IB sends out ? I guess what I'm trying to say is, where/on what form do I enter the profit or loss for the year on my tax return ? (not sure if I did it right last year !!)

Also, can I deduct just major expenses, ISP's, Cable internet, Software fee's related to trading. I'm not after nickle and dimming , just would like to know if I can deduct the obvious trading expenses. I have no other earned income but only trading . And it's not much, if any :-(

Thank you in advance.

Andy
More...
Andy, The info from Ib goes on form 6781. That's where you get the 60/40 split, then that info goes on sched d.

To deduct trading expenses, file sched c with job tiltle "full time trader" (You might want to include a few pages of your monthly statements to show them your trading style qualifies).

Do not show any profit or loss on sched c. Even though it looks strange. As a trader you are exempt from self employment taxes.

Then list on sched c in the spaces provided, or in the "other expenses" your expenses like software, isp, books, etc.

then on 1040 write the total expenses in as a sched c Business loss.

The forms can be downloaded from www.irs.gov

Just take some time and look over
1040
6781
Sched C
Sched D
 
It is confusing because mtm traders don't use sched d. And all 1256 contracts (which is what e mini are) are marked to market at year end. Most info out there is for stock traders, and for most stock traders mtm election is good. So you have to sift through it all because it is not always clear in the literature what everybody is talking about.

Trader tax status and mtm are often confused.
 
Quote from profitseer:
More...

good explanations, you could be a tax adviser as second career. Andy, thing will start clear up if you fill out those form early.
 
You must log in or register to reply here.
Back
Top