Hi, I'm wondering if trading options as a business is good option for my situation- - Part-time trader - W2 income, max 401(k) contribution thru job - In high-tax bracket and won't need trading gains as monthly income - Trade options spreads lasting few weeks to monthly expiration dates - Won't qualify for MTM if trading at individual account level - Would like to be able to deduct business expenses (books, software, CPA, trading conferences cost and travel) maximum possible - Would like to be able to take net gains/losses to personal tax return [gains minus losses minus business expenses] Should I continue as individual or trade as sole prop, limited/general partnership, LLC or S-Corp? Any help is much appreciated. Thanks rd
Do it as a sole propriator if you think you might have liabilities do it as a LLC and run it though your personal income. If you have losses its a plus, helps your high tax bracket If you have gains its a plus, you can deduct expenses running the office. (I am not a tax expert) For additional questions search for Robert Green, NY $400 bucks an hour, I have used him before.
Quote from rd100: I'm wondering if trading options as a business is good option for my situation Depends on whether you have an edge. Buying options for a length of time exposes you to time decay. Writing options exposes you to sudden large losses while limiting your upside. You either have an edge or you don't. Should I continue as individual or trade as LLC or S-Corp? Useless complexity for most traders.
Let's say I make 10K in options gains and have about 4K in expenses (magazine and online subscriptions, seminars cost and related travel expenses). Can I have net gains of 6K pass-thru to my personal tax return? How can I do that without MTM/trader tax status at individual or entity level? Does a husband/wife partnership work for this or a S-corp? If I had 5K in options losses and 4K in expenses, given that I don't have MTM, what would pass-thru to my personal tax return? Is it -3K in total or is it -3k in capital losses and also 4K in expenses? If you have an S-corp, can you just pay yourself reasonable salary once a year at the end of the year? Thanks for your help rd