Another route to take it to you report your trading as a business income, then you can deduct all costs, also, you get taxed on your Net Gain after all expences so loses are naturally included into your net gain calculation and you're not taxed unless you make money. If you have no other income that might be a good option. Also, something you supposed to do if your trading frequency is high. PS. This is not a tax advice.
Yes and you can also find many tax websites that explain tax rules more in detail and some even includes worksheets for you to do the calculations to understand the rules more fully. capital gains/losses tax rules are pretty much straightforward. You don't really need a tax accountant. In my 10+ years of trading, I have done stocks, ETN's, ETF's, options, currencies and I have never had to engage a tax accountant. All you need is a good ole' Excel and a good online tax software when filing taxes. Many times they have already programmed the rules in for you. You just punch in the numbers and they do all the calculations for you.
This is only when you have enough expenses to offset the business income otherwise the capital gains/losses approach is always better I find unless of course you are considered a daytrader then you would have no choice but to report your profit as business income and not capital gains.
In America, for a non-professional trader, this is not a complicated issue. Ignore @Overnight, he's only good for posting music videos. You can deduct losses up to your gains + 3,000. The rest is carried forward to the next year and is applied as loss for that year for the same calculation. If you read the IRS pamphlets it's pretty clear and straight forward any tax software will do the calculation for you.
... I believe the Federal loss allowed is 50% of $6,000 for a total of $3K loss per year, ant the total loss carry-forward is reduced by $6K. In other words, Losses are written off dollar for dollar against gains in the same year. Then you lose 50% of your write off against income every year after that. ***State of NJ allows no (zero) loss carryforward. Other local jurisdictions may have their own unique tax codes.
no. But I was Series 7 Registered in NJ long time ago (1980's). I just assume it's still there. Full disclosure, I now get my 1040 taxes done by a CPA firm in NJ. They never told me that any of that was wrong, or that the NJ rule had changed.
AFIK... it's still "$3000 write off on carry forwards"... not "carry forward balanced reduced by 50%". If you think otherwise, please inform the board. (Of course you could be talking about a state tax policy which is different from a Federal tax policy. ??) The tax policy on "loss carry forward" and "loss carry back" is interesting. From waaaay back, one could always "carry back losses 3-years"... to level-out the vagaries of "calendar" execution of trades. Later, the greedy government installed the "No carry back, and $3000 max carry forward policy". Then changed again to allow for "Loss carry back for 3 years". Income Tax policy is always "fluid", depending upon who is in office*. Traders need to be "on their toes" as to how these tax laws might apply to them and subsequent changes. * Just as is Estate Tax law. Traders who have accumulated $Millions need to be aware of this also.