I trade exclusively in an IRA now. I have been doing well and am considering trading in a non-IRA account. However, if about 40% of my profits are going to be paid as taxes each year, much of the incentive to trade outside of the IRA is lost. Are there ways to minimize taxes on trading profits? Thanks, Norm
1. Long-term capital gains 2. Dividends for long term positions 3. Trade futures (60/40 long/short term split) Are there anymore legal ways to reduce taxes?
Do you trade frequently in your IRA? I was under the impression that could cause problems. I pay alot in taxes and know too well what it's like to pay .45 out of each dollar I make. I would trade the heck out of your IRA and build up the profits, then I would trade the heck out of your ROTH IRA and build the profits. Trade a regular account just enough to make the money you need to live and enjoy your life. That's how I would approach it. If the founding fathers were alive today, there would be one hell of a tea party! Continued success to you! Mike
Why would this be a problem? A few people on ET have said the same thing but I haven't found any concrete evidence on this. A few other people have said that there are no rules on overtrading your IRA. It would be nice to know the facts on this. I certainly overtrade my Roth IRA. However, ever since the more stringent cash account rules came into being (annoying), I can basically only trade it every 3rd day anyway.
As a trader, I don't get to contribute to an IRA, because I don't have earned income, so.....I havn't completely researched it. That being said, I think I saw the article on the greentrader tax website.
By current law, no matter how long you hold a position, 60% of Commodity Futures profits are taxed as long term capital gains (currently 15%), and 40% are taxed as short term capital gains (currently whatever your marginal tax rate is). Assume a $10,000 net profit for the year. $6,000 @ 15% = $ 900 $4,000 @ 33% = $1,320 Total tax = $2,220 or 22.2% Trading commodities is NOT like trading equities. Buy and hold tax free bonds (not recommended) Jack
mschey is correct. It's a newer ruling by the IRS. Ultimately, it comes down to turnover, especially if you are, or were, a trader. They don't like an investment shelter being abused for the purposes of running a trading business, and have clarified their rulings/laws to reflect it. Tred lightly.
Are there any links for this IRS ruling? I have searched and never been able to find anything concrete about this.
IRA distributions are taxed as income, so one is effectively converting capital gains with a favorable tax rate to income with a less favorable rate, and forgoing any tax reduction from losses and favorable dividend treatment. This doesn't seem significant until one actually takes distributions and pays the taxes. If penalties enter the picture as well, the total tax paid becomes very significant. As one who is drawing from an IRA, I now know why the government is willing to postpone taking its tax.
I trade just about as frequenly as I can. There is no retriction, per se, against trading frequenly in an IRA. However, IRAs are non-margin accounts, so I must wait for settlement. This does tend to slow me down. Since IRAs are non-margin acounts, daytraders rule against frequent trading do not apply, as I understand the situation. And, I am beginning to trade options within the IRA. Norm