Trading Capital...

[sevensa 10]

okay does anyone know what the tax rate for day trading equities, individual stocks, is?

 

You pay short term capital gain tax on that. There is a wealth of information on the IRS's website available. Assuming you are from the USA.

 

Does it really matter though? You should not pick a market(s) based on how they get taxed. You should pick a market and style based on what you are comfortable with and then be thankful if you have to pay taxes, because this will mean you are profitable. Concentrate on being profitable first before you worry about all these other things. With the high blowout percentage of traders, that sad truth is that you might never be in a position to worry about taxes.

[brownsfan019 17]

You pay short term capital gain tax on that. There is a wealth of information on the IRS's website available. Assuming you are from the USA.

 

Does it really matter though? You should not pick a market(s) based on how they get taxed. You should pick a market and style based on what you are comfortable with and then be thankful if you have to pay taxes, because this will mean you are profitable. Concentrate on being profitable first before you worry about all these other things. With the high blowout percentage of traders, that sad truth is that you might never be in a position to worry about taxes.

 

Well said. Don't put the cart before the horse.

[goumie 10]

I am from the US and I understand what you are saying and I agree. I am not asking to determine whether or not I want to trade in the equity market but only because it was brought up by others as a coparative advantage with the futures market.

 

Also I will check the IRS site I was just asking in case someone knew off the top of their head.

 

But I do think it is good to learn before you decide to dedicate countless time to learning a market and pursuing it what you can expect as an end result. I agree it shouldnt be your only motive but I believe for me at least it factors in. No one just trades and spends all the time trying to learn for shits and giggles. The incentive always comes down to money in one way or another.

[brownsfan019 17]

Purely for $ and taxes, trade futures. You will pay a lot less, assuming you are a profitable trader. Much easier at tax time as well.

[Guest forsearch]

day trades are taxed at 40%, are you sure on this? i thought it was closer to 25

 

You are both correct. The blended 60/40 tax rate that Brownie referenced yields an effective tax rate of 23% when all is said and done.

 

More info here at this link:

 

Taxes for Traders webinar

 

And look at the tax form that was also posted above for more info.

 

-fs

[goumie 10]

My understanding that isnt that much lower than short term capital gains on equities which is around 20%. Long term holds over a year around around 15%. I can understand that the taxes themselves can get more complicated though as I have had to do them on investments but never traded in high quantity.

[Guest forsearch]

Do what ever you wish, Goumie. You've been given solid information here by several folks who actually trade futures for a living.

 

Your next step should be not to argue with us, but confirm the info with a competent tax professional of your choosing, like an accountant who specializes in doing taxes for traders.

 

Good luck.

 

-fs

[goumie 10]

sorry. Not trying to argue just trying to confirm.

 

I appreciate the information. Thanks

[sevensa 10]

Also I will check the IRS site I was just asking in case someone knew off the top of their head.

 

You ALWAYS should confirm with the source. If you get audited by the IRS and they find a mistake, will your excuse be that some guy on an online forum told you that it this is the way it works?

 

The incentive always comes down to money in one way or another.

 

Exactly. But if you are not profitable, you don't pay taxes. So what is your goal? To be profitable or to pay minimum taxes? Seems like you are more concerned about paying taxes. If this is the case, don't trade and get a low paying job somewhere; that will keep your taxes very low. If you want to be profitable, find a method and instrument(s) you are comfortable with and you might have a chance.

 

If you have the option to train to become a successful Formula 1 driver or a successful Nascar driver, will you pursue the one with lower taxes or the one you will enjoy more?

Edited August 15, 2008 by sevensa
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