My question is regarding trader status and state taxes. My state taxes ordinary income at ~6%. Short term capital gains are taxed ~12%. If you claim trader status, can the short term capital gains be treated like business income and get taxed at the 6% instead of 12%? Thanks
Assuming you are trading equities rather than regulated futures contracts, foreign currency contracts, non-equity options (and a few other things), I believe a trader is deemed to be in a business which generates capital gains and losses for federal income tax purposes. It is possible that the state law does not follow the federal law on this, however.
Trader status isn't relevant. The issue is whether or not you make the Mark-to-Market election. If you elect Mark-to-Market, your gains/losses are treated as ordinary income, not capital gains. At least for Federal purposes. You should check for any "exceptions" in your state tax laws.