Hi, can someone in New York or informed about this state explain if and how futures trading is taxed by the state and the city (NYC)? The federal tax rate comes out to 23%, but what about the state and city? Thank you!!
Capital gains due to 1256 contracts are treated as ordinary income by New York State and NYC. If the Federal tax rate for your futures trading is 23%, the total State and City tax may be around 11%.
Ouch. Thanks for the reply moonmist. Personally withholding 35% of my realized gains seems to be the safest option before it comes to hiring an accountant.
Retail trading in a high tax environment is a surefire way to fail. Anyone who has been trading for long time and who generates consistent profits should be trading out of Hong Kong, Singapore or the like. What's the point in generating PNL when it is taxed at >30% aggregate rates? Makes zero sense. Why you think most all large hedge funds are incorporated or registered in tax exempt jurisdictions? You already get slapped on your hands with earning on dividends, interest. Then you add US income tax rates/capital gains taxes (depending on asset class and other variables) and then you pay local or state taxes as well? Lol. I pay exactly zero percent taxes on all my currency and futures pnl generating trades. 100% legal.
You must not be a U.S. citizen? For US citizens, income is taxable worldwide and you can't set up a foreign corp to get around it unless you do some pretty complicated stuff that includes a company which derives the majority of its profits from non-trading operations or the company is majority owned by non U.S. citizens. This is why PE funds set up offshore funds, they own operating companies. An offshore hedge fund that is purely an investing company doesn't provide any tax benefits for a U.S. citizen or company majority owned by U.S. citizens. Trading out of Hong Kong won't help a U.S. citizen avoid federal taxes, might work for Volpunter if he isn't a U.S. citizen but odds are good the OP is given that the majority of those exposed to NY taxes are U.S. citizens.