Day Trading Taxes, IRS Trader Tax Status vs Investor Status in US

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🔽Time stamps:
2:08 IRS Capital acquire tax charges
4:13 Tax breaks & wash sale rule for investor merchants
7:55 Greatest manner for submitting day buying and selling taxes- TTS tax breaks
10:09 Learn how to qualify for Trader Tax Status

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Learn how to file day buying and selling taxes within the US? Learn how to qualify for Trader Tax Status underneath IRS guidelines. Most Day Traders and Swing Traders fall underneath the common investor standing when submitting for IRS taxes.
Capital good points for traders fall underneath 2 classes: Long run and brief time period tax charges.

1. Long run tax charge: Extra favorable tax charge for traders. However just for inventory market positions held for over one yr. So typically day merchants and swing merchants don’t qualify for this.
2. Quick time period tax charge: Day buying and selling and swing buying and selling are taxed as bizarre earnings tax charges.

Submitting inventory market taxes as investor standing has restricted write offs as a consequence of Tax Cuts and Jobs Act 2017, must observe Wash Sale Rule, and might solely declare as much as $3000 capital loss towards earnings per yr.

That is why day merchants favor Trader Tax Status designation. TTS permits totally deductible losses, no wash sale rule, and beneficiant tax write offs for buying and selling bills. However the TTS is more durable to qualify.

Common IRS Information for Trader Tax Status
1. No less than 30 hrs per week spent on buying and selling actions
2. Common holding interval is lower than 31 days
3. Working with crucial instruments and software program
4. Trading with a major buying and selling account

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  1. Where did you get 8 years limit to carry forward capital losses. I believe it's forever in the US. Quoting this from HR Block website: "You can report current year net losses up to $3,000 — or $1,500 if married filing separately. Carry over net losses of more than $3,000 to next year’s return. You can carry over capital losses indefinitely."

  2. Someone told me that if I sell a stock for the same price I bought it, the IRS still deducts money from my sell, which means, I'll be losing money even if I don't get any profit from it. Is that true? I would appreciate if someone clarifies that to me.

  3. hi Humbled Trader or anyone who know this question. Assuming you have a net gain at the end of each quarter (say ~100k usd each quarter), do you still have to make quarterly tax payments if you or your business entity qualifies for TTS? Or due to the mark to market election, you can just make ONE tax payment on your total annual gain before January 15 of the following year? Thanks a lot.

  4. How to calculate the average holding period? Can you give me an example? Say I have held 1 SPXL for 30 days, and 1000 AHT for 1 day, is the average holding period calculated as (1*30+1000*1)/(1+1000)? Thank you!

  5. Using TOS never did an excel with all my trades. Is it possible to retrieve from TOS or from TD ameritrade a list of all my purchases or sells?

  6. You can’t elect mark-to-market for the previous years trading activity. You have to elect 475 by April 15 in the year you want to be a mark-to-market trader. You can retroactively claim TTS if you qualify. I think you’re confusing TTS and 475. Now, you can elect 475 during the year IF you are setting up an entity (LLC/S-Corp).

  7. I think non us youtubers shoud not give any info to irs, as they are not employed by youtube, they are non us residents and if they care about theyre data.

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