taxes on futures

Discussion in 'Taxes and Accounting' started by ggoyal, Oct 14, 2008.

  1. ggoyal


    quick question,

    trading the eminis(ES & NQ), i would be paying taxes of 23% correct under the 60/40 rule? seems pretty good.

    60% long term rate
    40% short term rate

    = 23%
  2. Jachyra


    Thats correct, however, if you lose you can only deduct a maximum of $3,000 per year and you lose the preferential tax treatment if you ever lease or buy an exchange membership.
  3. Consider tax treatment if you trade from a Roth IRA.

    Zero for qualified distributions...

    Worst case 23% + 10% penalty but you get

    a. All losses and gains net out... Whatcha got in your account is whatcha got.
    b. Ability to use the 23% saved in taxes for investing.
    c. Doesn't mess up your other income.
  4. Only if tax return is filed as an individual rather than a business structure.

    Wrong. Preferential tax treatment of capital gains is not affected. However, self-employment tax, currently 15.3% becomes applicable. As above, if you file as an individual versus using a business structure, 100% of the gains are considered ordinary income with no great potential for writedowns/writeoffs.

    23% blended tax rate is correct.

  5. How did you manage to come up with that nonsense?

    Exchange members get 60/40 treatment. It was lobbyists paid for by exchange members that got 60/40 written into Section 1256 in the first place.
  6. You absolutely get 60/40 if you are a member. Many of my friends on the floor would be in a rage if they didn't.

    However, when obama's socialist economics takes over capitalism, there will be no need to work anymore when you can get a steady welfare check.
  7. Jachyra


    I confirmed this last year with Robert Green when I was trying to decide between leasing a full membership or going with an ECM, so I can tell you with absolute certainty that unless something has changed within the last year, that if you lease or purchase an exchange membership with a futures exchange, you lose the 60/40 blended rate and all your gains are counted as ordinary income. According to him, the only exception is the CME's Electronic Corporate Membership.
  8. Jachyra


    Oh and don't forget that in addition to it being counted as earned income, its also subject to self-employment tax.

    For those earlier poster's who were non-believers, here are a couple snippets from Robert Green's website:
  9. ggoyal


    ok, so let me get this straight,

    if my futures income is the only income I have, then I have to pay additional amount over the 23%? I was guessing there would be some social sec and fica?

    can someone please give an explanation as to what the exact amount would be if say someone earns 150k only trading futures. no other income at all.
  10. No social security or fica, becaue it is not considered a business. Just 23% plus state income tax depending on your state. If you want to consider it a business and have trader tax status then you would have to pay social security. So best to not have trader tax status.

    Correct me if I'm wrong guys.
    #10     Oct 15, 2008