Taxes on Day Trading

Discussion in 'Taxes and Accounting' started by sappjason, Feb 22, 2009.

  1. Hello,
    Well, after a few years of serious software development, I am finally achieving some really good results and last year ended up being my first year as a successful day trader. So now, it's tax time and I'm realizing that short term capital gains taxes SUCK.
    So, my question is this: What can I do to reduce the tax that I owe? Right now, I am a full time software engineer and my software trades for me while I'm at work. So, I don't think that I can say (for tax purposes) that I'm a full-time day trader (at least not within the next two years).

    Thanks so much,

  2. Short term cap gains are the same as regular income. What do you do to reduce your taxes normally?

    One reason you feel the tax bite so acutely from your trading income is you don't have income tax withholding on it. So you have to actually write a big check yourself instead of having your employer take care of it invisibly.

    If you're really making "too much" money, you could set up a corporation for your trading business in a tax friendly state like Nevada. You could lessen your tax burden somewhat that way. It's a big hassle though. (No, I haven't done this myself. A friend of mine did.)