taxes on futures

Quote from Traber:

Thanks for this thread. A lot of info here. This is my 1st year of trading.

I just want to see if my math is correct here.

Single, no kids, Florida - so no state tax.

$10,000 profit trading the YM. it's not this much but for the sake of the number. Tax bracket 25%: from $32,551 to $78,850. Got this number from Wikipedia. http://en.wikipedia.org/wiki/Tax_bracket

$6,000 x .15= $900
$4,000 x .25= $1000

So $1,900 in taxes on $10,000. Nothing more?

the $1,900 will be minus my income tax return or just filed/paid separately?

Also what about joint accounts. Any info on that?

Thanks again
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Close but not quite... for futures transactions only... you would pay 60% at the maximum long term capital gains rate of 15%:

( $10,000 * 0.60 ) * 0.15 = $900

and 40% at the maximum short term capital gains rate of 35%:

( $10,000 * .40 ) * 0.35 = $1,400

So that would be a total tax liability of $2,300 which is essentially 23% :

$900 + 1,400 = $2,300

This would be the same rate regardless as to whether you file jointly or individually.
 
Quote from Jachyra:

Close but not quite... for futures transactions only... you would pay 60% at the maximum long term capital gains rate of 15%:

( $10,000 * 0.60 ) * 0.15 = $900

and 40% at the maximum short term capital gains rate of 35%:

( $10,000 * .40 ) * 0.35 = $1,400

So that would be a total tax liability of $2,300 which is essentially 23% :

$900 + 1,400 = $2,300

This would be the same rate regardless as to whether you file jointly or independently.
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Thank you very much Jachyra
 
Quote from Jachyra:

Close but not quite... for futures transactions only... you would pay...40% at the maximum short term capital gains rate of 35%:
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This is incorrect. For the 40% portion, you don't pay the maximum short term rate, you pay whatever rate the income falls into per bracket.

Traber had it right. If he's in the 25% bracket, then the 40% portion of his futures gain will be taxed at that rate, not at the highest rate (35%).
 
Quote from Trader KGB:

This is incorrect. For the 40% portion, you don't pay the maximum short term rate, you pay whatever rate the income falls into per bracket.

Traber had it right. If he's in the 25% bracket, then the 40% portion of his futures gain will be taxed at that rate, not at the highest rate (35%).
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LOL... you guys are awesome... I started off posting to this thread because I thought I had a pretty decent handle on this stuff and was trying to help someone else... turns out I needed just as much help... Thank goodness I don't do my own taxes.

I officially vow to never make another post regarding tax related issues as there are certainly more qualified individuals to respond.
 
Quote from Trader KGB:

This is incorrect. For the 40% portion, you don't pay the maximum short term rate, you pay whatever rate the income falls into per bracket.

Traber had it right. If he's in the 25% bracket, then the 40% portion of his futures gain will be taxed at that rate, not at the highest rate (35%).
More...

Thanks Trader KGB.

Do you know if it's the same for joint accounts?

Probably take the account holder with the highest tax bracket and use that number.

I will have to research this and find out

Edit. I found out in case any one was wondering.

It is always the primary holder on the account. The secondary signer would be liable if the primary is deceased.
 
Question that goes along with this thread....

In 2005, I lost $8,000 trading futures and did not deduct it from my ordinary income, I didn't even include it on my tax return (I believe I just put 0 for capital gains).

Can I amend that tax return and report that loss now to deduct 3k from my ordinary income this year? If not, could someone please let me know why? Suggestions/advice appreciated, thank you!
 
Quote from Simmy:

Question that goes along with this thread....

In 2005, I lost $8,000 trading futures and did not deduct it from my ordinary income, I didn't even include it on my tax return (I believe I just put 0 for capital gains).

Can I amend that tax return and report that loss now to deduct 3k from my ordinary income this year? If not, could someone please let me know why? Suggestions/advice appreciated, thank you!
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You have to amend your tax returns for 2005, 2006 and 2007 to use up the $8,000 loss.

Make sure when amending the 2005 return that the futures loss is reported on Form 6781.

Don't be suprised if the IRS wants to see documentation of the unreported loss.
 
Thank you very very much for the information! I would normally have to pay for the kind of advice you're giving me here.

If I am declaring a loss from 2005, can't I just amend that year's return and carry the 8k forward indefinitely? For example, instead of offsetting prior income, I would use the loss to offset my 2009, 2010, and 2011 income. I don't really see the point of reducing past income taxes that I have already paid.


Quote from jeb9999:

You have to amend your tax returns for 2005, 2006 and 2007 to use up the $8,000 loss.

Make sure when amending the 2005 return that the futures loss is reported on Form 6781.

Don't be suprised if the IRS wants to see documentation of the unreported loss.
More...
 
Quote from Simmy:

Thank you very very much for the information! I would normally have to pay for the kind of advice you're giving me here.

If I am declaring a loss from 2005, can't I just amend that year's return and carry the 8k forward indefinitely? For example, instead of offsetting prior income, I would use the loss to offset my 2009, 2010, and 2011 income. I don't really see the point of reducing past income taxes that I have already paid.
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The IRS requires you to do income and loss accounting the proper way. You lost the money in 2005 and must report it on an amended 2005 return. You then have a tax loss carryforward that must be used in the years immediately following 2005. The IRS does not allow you to skip years with your tax loss carryforward.

Do it the proper way or don't do it at all.
 
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