itemized deductions

Discussion in 'Professional Trading' started by o_2_b_sean, Apr 12, 2002.

  1. I made the MME this year for 2002 and on. I have been giving some thought to things that I could get now and deduct later that might improve my trading, my life, etc.

    Here is a small list I pulled from a tax booklet for day traders:

    publications: $860
    research: $775
    continuing education: $1500
    ISP Fees: $240
    Charting: $865
    Chat Room Feeds: $1050
    Level II Fees: $2900
    ------------------------
    Total: $ 8190

    Have any of you traders with Mark to Market actually claimed that much in itemized deductions. I sure would like to hear if you did and also if this list/example doesn't cover all the possible deductions. What about something like a new laptop? I suppose the real answer to this question lies in what deductions self employed people can take. As "self imployment" status is one of the things you as a trader are electing by filing the MME.
     
  2. tntneo

    tntneo Moderator

    sure, and if you trade at home you can deduct a part of your mortgage or rent (based on the area in your home you use).
    anyway, just look at itemized deductions publication from the IRS. whatever applies to small business does apply to you.
    you can deduct up to your total income.. you just can't do it for too long :) hehe.
    just kidding.

    seriously, it's a small home biz, that's how the IRS looks at it. no special treatment (but the MTM) expenses related to trading activity is easy to justify and deduct. keep proper books about all this, cause chances of an audit are real.
     
  3. JPB

    JPB

    I don't think it's quite the same as self employment, is it? I don't think you have to pay self-employment tax. If I'm wrong here, someone please let me know before Monday (when I'm sending in my MTM election).

    Thanks,

    Johnny
     
  4. Tntneo I didn't know that about the rent. Very cool. I will look into it. I agree about keeping good records though. This kind of pushing the envelope is sure to raise eyebrows at the IRS.

    JPB, don't worry about the self employment tax. I can tell you with 100% certainty that they don't apply, even though, it IS considered self employment. Here is a link with the basics on the Mark to Market election: http://www.fairmark.com/sitemap.htm
     
  5. Banjo

    Banjo

    what you're calling self employment tax is the 1/2 of social security that the employer usually pays, the other half is deducted from the employees check. If you're a small biz you get to pay the whole thing. Welcome to the club.It's the same weather you're a cabinet maker or a trader.
     
  6. JPB

    JPB

    I went through most of the links, and couldn't find it. I know i've read that self-employment tax doesn't apply, but I can't remeber where. I would like to hear from someone who has (or hasn't) paid it as a trader (this is my first year doing taxes as a trader).

    Banjo--Where are you getting your info?

    Thanks,

    Johnny
     
  7. Banjo

    Banjo

    from many years in many business', you're not going to beat the social security tax, maybe the self emp tax you're talking about is something else. Ask any cpa.
     
  8. All the deductions listed are legitimate, I make them all myself. I also claim 10% of my insurance, utilities etc. I have decided not to make a home office deduction, I think it complicates issues when it comes time to sell the house.

    There are several advantages of MTM. One of the greatest is loss insurance in which you do not have the limitation of writing off a maximum of $3000 in losses against other income. You can also carry back losses two years.

    There is no self employment tax for traders whether you file MTM or not.

    This is from the horses mouth:
    Self-employment tax. Gains and losses from selling securities as part of a trading business are not subject to self-employment tax. This is true whether the election is made or not.

    http://www.irs.gov/formspubs/display/0,,i1=50&genericId=12278,00.html

    Stuart
     
  9. Banjo

    Banjo

    Thanks for the page Stewart, I've never been able to avoid social securtity taxes. This looks like an answer. At 15.3% it is a consideration of consequence. Only a portion of my earnings have been from trading and I assumed I was also paying ss tax on that. http://www.irs.gov/formspubs/display/0,,i1=50&genericId=11973,00.html A complete definition of self employment tax.
     
  10. nkhoi

    nkhoi Moderator

    home office deduction, oversea coporation status trigger red flag, unless you don't care if you get an audit letter or not.
     
    #10     Apr 12, 2002