Massachussets imposes a 12% State Tax on all short term capital gains. No wonder there are hardly any prop shops in Boston!
I am planning on moving to Boston and am a remote equities trader who currently files a k-1, reporting all income as short term capital gains.
How can I avoid paying that 12%? Can I set up a business entity in, say, Delaware, to avoid it?
Thanks for any input.
you might consider setting up a "hedge fund" with offices in nevada or florida. Get some small investors (maybe insignificantly small) and then pay yourself a salary as a trader and maybe someone else as bookeeper.
The salary in MA would be taxable but if set up properly and elected marked to market you might avoid state income tax and fica on the profits.
You should become very knowledgable about this or hire a very smart lawyer and accountant.
And there is no guarantee your structure will not be challenged.
Back when I was making enough trading to care about this - I had to educate all the accuntants for my business. for the smart ones it rang a bell immediately. some just never could get why a trader did not have to pay fica if he was not a dealer or a floor trader.
By the way this distinction was not something prop firms wished ackowledge either. But the IRS did in my case becasue I explained in on my returns and in a trader in my offices case when he was audited.