.
to me,
the biggest advantage is, when you have a losing year [more than $3,000, if i recall]
you can carry that loss over to the next years [hopefully] gains
marc
Do you need a business entity to qualify for trader tax status?
- Thread starter mlturrin
- Start date
to me,
the biggest advantage is, when you have a losing year [more than $3,000, if i recall]
you can carry that loss over to the next years [hopefully] gains
marc
.
to me,
the biggest advantage is, when you have a losing year [more than $3,000, if i recall]
you can carry that loss over to the next years [hopefully] gains
marc
You can do that anyway.
Haha yep. Everyone can do this regardless of trader status or not. It still surprises me people think they can somehow only count 3k worth of losses against their gains. That's never the case - it's always been can only deduct 3k worth of NET gain+loss if there's a net loss, the rest carries forward to next year to be used against future gains and losses.
If you are a 6 or 7 figure earner, whether from trading or not, a 3k deduction is not worth much. Imagine carrying forward a 50K loss (for example), at the rate of 3K per year... 16+ tax years, not including any losses incurred during those 16+ years! But if the 50K (for example) could be taken at once, it means something today, and simplifies life going forward. It's all commensurate with where you play the game.
If you lose 50k this year. You can take 3k this year against other income and roll the other 47. Next year suppose you make 60k. You can offset the 47k against that 60k gain and only pay taxes on 13k.
This is not correct for trading losses, and certain other types of capital losses.
That is the difference between "Investor status" and "Trader status".
Unless you have trader status, your offset is limited to 3K PER YEAR, period.
https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010729
The loss gets carried to the next year and is treated as if it were incurred that year (ie offsets gains from the next year like losses that year are).
Yup. The lesser of 3k or the total net loss.
Re-read the link you posted.
Capital Losses
If your capital losses are more than your capital gains, you can claim a capital loss deduction. Report the deduction on line 13 of Form 1040, enclosed in parentheses.
Limit on deduction. Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of:
- $3,000 ($1,500 if you are married and file a separate return), or
- Your total net loss as shown on line 16 of Schedule D (Form 1040).
Capital loss carryover. If you have a total net loss on line 16 of Schedule D (Form 1040) that is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year. If part of the loss is still unused, you can carry it over to later years until it is completely used up.
You are misreading the statement. If after year 2, you haven't earned enough to offset the carryforwarded loss, you can continue to roll remainder forward.
Net loss of 3,000 can be applied against other shapes of income (like w2 wages, dividend, etc). Suppose you lose 50,000 and then call trading quits and get a job. You can deduct 3k each year against your w2 wages until the 50k is exhausted. If you earn trading/investing money, you can deduct up to your gross gains against that.
This isn't really a debatable issue. You should call your accountant and verify this. I did.
Net loss of 3,000 can be applied against other shapes of income (like w2 wages, dividend, etc). Suppose you lose 50,000 and then call trading quits and get a job. You can deduct 3k each year against your w2 wages until the 50k is exhausted. If you earn trading/investing money, you can deduct up to your gross gains against that.
This isn't really a debatable issue. You should call your accountant and verify this. I did.
Yup. And that is/was the basis of my original post in this thread. Your reply post to that post seemed to challenge the 3K yearly deduction limit, suggesting the entire unused portion could be used the following year, which is not correct.