Tax Rates on Day Traders

Discussion in 'Taxes and Accounting' started by TradingBillions, Feb 27, 2007.

  1. Hey everyone. I'd like to know how high I will be taxed if I trade over 10-20 times per day in the futures market. Anyone have a percentage and what taxes I have to pay? Would tax rates be less if I trade through my business?

  2. i dont know how the u.s. tax works but im gonna assume its similar to canada and you are going to get taxed straight up as income, so its going to be the same as whatever you were doing before.

    i was going to set it up as a corporation but the problem is that then you are going to face double taxation, and are going to be taxed as a corporation, then you are going to face personal income tax on whatever you pay yourself.

    only advantage of taxing yourself as a corporation is if you are making HUGE returns as a daytrader and you wanna leave money in the corporation and take advantage of the estimated 25% tax rate, to allow ome long term stuff the chance to compound.

    my old man is an exlawyer who owns some extremely lucrative businesses now and ive talked to him lots about this, the main thing is that through incorporation you still have to figure out a way to get the income to yourself, without double taxation, if you are making big money, pay for a good accountant, those are the only 2 you never wanna cheap out on a lwayer and an accountant cause they will save you huge money if they are good in the long run
  3. hmm, thanks for this reply.. i'm really considering talking with my accountant. i definatly should get a laywer for something like this. do you know how much they generally run for for stock based taxation cases?
  4. Quah


    With futures, it doesn't matter how many times a day you trade.

    Futures are treated as Section 1256 contracts.

    60% of your profits are taxed as long term capital gains, 40% of your profits are taxed as short term capital gains.

    See IRS form 6781.

    This is one of the advantages to trading futures instead of equities.

    Of course, all this assumes there are actually profits to be taxed...:p
  5. Nope. Futures traders taxed at cap gains rates in US (60/40 long term, short term).

    We are pretty much taxed lower on everything which is why we have no national health care, etc.
  6. And remember too, that all trading gains be they long or short term aren't subject to self-employment (FICA) taxes so there's another 15% of your income you don't lose.

    Again, assuming you have gains to speak of :D
  7. kowboy


    I found Irs topic 429 helpful.
  8. that was 60/40 sht term, long term. I wish it was the other way around.
  9. This actually depends on whether or not you choose trader status so that you can claim "earned income" and contribute to an IRA. The beauty of it is that you can claim only a certain amount of earned income in order to do this. You pay FICA only on the earned income. This little trick can actually lower your overall taxes, while also giving you a separate tax free fund to build wealth. I do this for my position trading (in the IRA).

    Its completely voluntary. Buy Robert Green's book on this. I forget the title. Try an author search via Amazon.
  10. zdreg


    that is a hell of foolish assumption. it is as bad as some fools south of the border who think that Canada is part of the states
    #10     Feb 28, 2007