Is it worth it to file for TTS status in general? I heard once you select it, it is hard to go back. Is the main benefit taking more than a 3k loss deduction? Not sure how much you can deduct for business expenses since I do not spend that much money on software or education. The last 4 years I have averaged low six figures profit (low 100s). I know I will qualify since I spent over $80k in commissions yearly and daytrade a lot daily.
If you know you will be active and know you will make money, an entity with MTM will provide lower tax rates, enable you to write off Business expenses and remove the wash sales. You should contact green trader tax.
Assuming you qualify for trader tax status and you are constantly trading the same symbols over and over, then mark-to-market accounting is very nice compared to dealing with wash sales. Being able to write off expenses as business expenses is pretty nice too if you are paying a lot in data fees.
From the numbers you've given, IMO, 100K is a little light to realize much monetary benefit from filing as an individual business trader. Also, IMO, everyone should investigate any and all legal tax breaks they are eligible for and if deemed worthwhile, utilize them! As for elimination of the 3k loss deduction... according to your numbers, that wouldn't be applicable, so unless there are other benefits for you, that's a big nothing burger. But there's a bigger issue. "Other" default benefits (no wash sale, expensing, etc) for a business trader, require a timely application filing with the IRS for MTM accounting. For 2018 taxes that ship sailed... April 18, 2018 was the deadline for individuals. Also it is MTM accounting that requires IRS approval to revert, not TTS. MTM is considered a permanent change until/unless revoked, while TTS is a year-by-year qualification and is based on facts and circumstances. There is no official TTS "test" nor any document or form to file with the IRS for TTS. As always, seek professional advise. Already mentioned, greentradertax.com is THE expert in the field. Green also publishes an annual Trader Tax Guide book... there is still time to get 2019 business trader status in order!! April 17, 2019 is the MTM filing deadline for individuals. HTH
Consult a qualified professional or accountant for your business expense. I imagine you have other expenses you normally, do not think off as expenses. What you pay your accountant probably, will more than payoff in lots of deductions.
Just a note that the wash sale rule only impact your December trading, just to keep that "benefit" in perspective.
Thanks everyone! I barely spend any money on data. I just use Tos and that's it. My main cost is commissions but I'm getting about $3 a trade.
Thank you for posting; you seem to know more than most about this. In general, do you think a trader who meets TTS, but has not filed that way, would benefit from employing Green, who they say is expensive, and filing with TTS, if he only trades futures (no stocks) and thus already gets 60/40, and has profits of $100k and trading expenses = $20k? Also, would it be further beneficial to establish an entity, which seems like it may be a lot of extra work, maybe increase data costs to pro, etc.? The only other income would be $60k pension and interest. TIA!
I am NOT credentialed, therefore not legally qualified to give tax advise. I can offer my opinion only. IMO, your trading profits, 100K, is too little to concern and complicate your matters with this potentially jeopardizing stuff. Everyone of course is different, and I am sure there are facets to your world have not been mentioned, but, 100K trading profits is too small. IMO There are a couple of "quick and easy guideline tests", IMO, that one can use regarding this too little aspect. These are my ideas. I have not seen them suggested elsewhere, maybe for good reason, LOL, IDK. The first one is the current social security taxable earnings limit... for 2018 it is $128,400. For 2019 it is $132,900. If your trading profits are less, the business trader road might not be beneficial. The other is more complicated, and specific to futures...Take a look at how much you could lease a seat on the exchange for, and see how beneficial it would be for you. Savings on commissions and fees, SE-tax, professional data fees, monthly seat lease, etc, etc. If this exercise suggests you will benefit, than it may be a good idea to seek professional advise. Another thing it can tell is at what point leasing a seat would make sense. Remember, this exercise is fact gathering. Leasing a seat is not necessary for business trader taxation. Where I differ from many here is that I went down this road for one reason... for earned income. Green saved the day for guys like me. While earned income is tax-related, taxation was not my reason. From there, well... HTH.