should I incorporate my trading activities

[kashili]

From last 2 months, I am closing 2-3 positions every day. My expenses are growing every day (transaction costs, monthly subscription costs, hardware costs, software costs).

I have a full time job, which is my primary income. But my trading expenses are ballooning and would like to take tax deductions.

At what point should I create a company(s-corp, c-corp, llc)?
I prefer to ask the question here (than a CPA).
Thank you

 

[loyek590]

From last 2 months, I am closing 2-3 positions every day. My expenses are growing every day (transaction costs, monthly subscription costs, hardware costs, software costs).

I have a full time job, which is my primary income. But my trading expenses are ballooning and would like to take tax deductions.

At what point should I create a company(s-corp, c-corp, llc)?
I prefer to ask the question here (than a CPA).
Thank you

the reason most incorporate is to protect your trading account from a lawsuit. For instance, your dog bites the neighbor. He can sue you, but he can't sue your trading account if it is incorporated. Just remember, if you do incorporate, yes, you will be able to write off expenses, but your profits will be subject to self employment taxes.

Most don't actually incorporate, you form what is called an LLC. To actually incorporate is quite more complicated and I am not qualified to comment.

Also, in a losing year, you will not be able to offset your income from your day job with your trading losses.

Also, some of your investment expenses may already be tax deductible. It's kind of cloudy. Most of the laws were written before computers. In the old days, news letter subscriptions were tax deductible.

and another thing, you will have to pay the professional fee for your data feed from your broker, which may be free now.

 

[Slimcan]

Good point, LLC, I opened one but I did it in NYC > I think it would have been better using my home upstate because NYC income taxes are high .

 

[Slimcan]

Also, some of your investment expenses may already be tax deductible ? I have a question for Loyek590, about margin account interest. Is the interest deductible? If it is not...........then a LLC may also be the way to go.

 

[bone]

Set up a Sole Member LLC, and keep a separate business banking account in the name of your LLC for all of your trading-related income and expenses. That action says that your trading is not a hobby - but a serious endeavor to make more money. It's much easier if you are trading futures to marry your trading income and expenses along with your W-2 Ordinary Income.