Trading Taxes EXPLAINED! Step-by-Step

Trading Taxes EXPLAINED! Step-by-Step | Coffee With Markus Episode 52

In this video I will discuss the basic requirements established by the IRS to be eligible for qualifying as a trading business, or getting the Tax Trading Status. Even though I’m going to cover this in depth, I highly recommend that you consult a tax professional.

What are some of the benefits of having a Tax Trading Status?

DEDUCTIONS!!! When trading as a business you can deduct as a business. What are these expenses?

You can deduct expenses such as your home office and educational materials. You can also deduct starting expenses such as:

- Organizational expenses
- Tangible property expenses
- Computer and Monitor, Software
- Educational expenses
- Travel expenses
- Subscriptions for market data and newsletters
- Stock borrowing fees, when you’re shorting stocks
- Margin interest

The guidelines used to determine whether a business qualifies as a “ traders in security” is found on the IRS Website under Topic 429: https://www.irs.gov/taxtopics/tc429

As we consider some this set of guidelines, please remember to consult a professional CPA. GreenTraderTax.com, established by Robert Green, has a few golden rules regarding the IRS guidelines for your business. Learn more about their consulting services here: https://greentradertax.com/services/consulting/

What is needed for the IRS to recognize you as a trader? Refer to this article from the IRS titled “Traders In Securities” : https://www.irs.gov/taxtopics/tc429

A key question to consider is what would actually qualify as a Trading Business?

Well for a start, buying and selling securities for your OWN account. You must meet all of the requirements set forth in the IRS policy to qualify as a securities trader. These rules can be vague but with some guidance we can make sure we meet their standards.

Let’s discuss the basic criteria laid out in the IRS documentation:
- You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation;
- Your activity must be substantial; and
- You must carry on the activity with continuity and regularity.

As you can see these guidelines are very vague so I will go into more detail these specific criteria.

The document goes on to say “The following facts and circumstances should be considered in determining if your activity is a securities trading business:”

- Typical holding periods for securities bought and sold;
- The frequency and dollar amount of your trades during the year;
- The extent to which you pursue the activity to produce income for a livelihood; and
- The amount of time you devote to the activity.



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Видео Trading Taxes EXPLAINED! Step-by-Step канала Markus Heitkoetter