Deducting Trading Expenses

TGregg

TGregg

In order to deduct non-comission trading expenses (books, information feeds, hardware, etc.) one needs to set up a company (LLC or LP or sole propritor or corporation) right? And, if you do that, do you have to register with your broker as a pro?
 
Agree - have been doing it for years without an LLC. I am a m to m trader, but I think to deduct most of these expenses do not even need that - just a declaration (and some proof) that you trade for a living.
 
Unless something has changed, I believe that it was a schedule c - trader status- that I used to file. Active Trader (not to plug the mag.) generally has tax info for traders - often written by Tesser or Green, both CPAs specializing in trader related practices. Think they both have websites if you have not already got the right info. HTH

gordo
 
My accountant wrote off the expenses even though I wasn't M to M (although I declared it for the following year), see a trading accountant.
 
Quote from TGregg:

In order to deduct non-comission trading expenses (books, information feeds, hardware, etc.) one needs to set up a company (LLC or LP or sole propritor or corporation) right? And, if you do that, do you have to register with your broker as a pro?
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Most of the Pro firms are set up this way already. Some will let you hand them reciepts for the year and deduct this from your account so your expenses are spent pre tax dollars.

Robert
 
Take a look at this link, it provides a very good review of the tax law as it applies to traders. http://www.fairmark.com/traders/index.htm

There are also some good links on the IRS web page: http://www.irs.gov/formspubs/page/0,,id=12278,00.html

I agree with earlier statements that you do not need to form a corporation. I file as a sole proprietor. I also have elected the mark to market (MTM) accounting. As such I file form 4797 rather than schedule D. I deduct all my expenses, including tuition, books, datafeed, charting s/w etc.

Stuart
 
Rtharp way of having the prop firm reimburse expenses would greatly decrease the audit risk, so its a great idea.

Declaring trader status would have no impact on the deductability of trading expenses if you where audited. you would have to prove that your trading activity was substantial enough to qualify for trader status.
 
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
 
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