Taxes and scalping ES

R

Runquick

I am looking at scalping S&P emini futures regularly and wondered how it works taxwise with the brokerage commissions and fees directly associated with the trades.

I've been averaging ABOUT 50 round trips per day (10-15 contracts per scalp) so the fees/commissions add up quick.

Am I taxed on the GROSS profit or can you offset the gross profit by deducting the fees/commisisons from that gross amount and pay the taxes on the amount net of fees/commissions?

Of course the next question is should I be setting up a single member LLC to do this trading?

I know that the info I am providing is limited so I am not looking forward to an in depth answer, just a rough idea so I can see if this makes any sense (taxwise only, not trading-wise!).

Thanks!
 
Quote from Runquick:

I am looking at scalping S&P emini futures regularly and wondered how it works taxwise with the brokerage commissions and fees directly associated with the trades.

I've been averaging ABOUT 50 round trips per day (10-15 contracts per scalp) so the fees/commissions add up quick.

Am I taxed on the GROSS profit or can you offset the gross profit by deducting the fees/commisisons from that gross amount and pay the taxes on the amount net of fees/commissions?

Of course the next question is should I be setting up a single member LLC to do this trading?

I know that the info I am providing is limited so I am not looking forward to an in depth answer, just a rough idea so I can see if this makes any sense (taxwise only, not trading-wise!).

Thanks!
More...

Can I ask one simple question.?...bearing in mind nobody knows who you are ...and vice versa...

How much working capital did you start with?
 
You are taxed on the net amount, after commissions. Subtract your balance in the account on 12/31 from the balance on 1/1, and enter it on IRS form 6781.

Hopefully it's a positive number!

PS: You might want to GOOGLE taxation of 1256 contracts before you flip your next 15 lot, what a joke.
 
Income taxes are on net profits not gross profits. Take at look at Form 6781 and Schedule D for detailed information.

If you are doing 500+ RTs a day you should look into leasing an IOM seat. Current IOM seat leases run $2200 a month. If you do lease a seat your net profits will be subject to SE FICA tax in addition to income tax.
 
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