Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

ctvas

How Much Does the IRS Tax Your Trade Winnings?

Recommended Posts

Now there's a question i always wanted to reply to. I live in the Netherlands, so i haven't a clue how much the IRS taxes trading profits, i've read numbers between 20 and 30%...

 

The reason i love to to reply is i still find it unbelievable that the Dutch IRS taxes trading profits a tiny 1.2%......and that's on profits OVER €25K/year. Amazing but true. This has to change at some point but it's been like this for ages.

Share this post


Link to post
Share on other sites

If trading is your main source of income (ie if it's your primary business and you run it as one), you don't pay self-employment taxes and your profits (after business expenses/deductions) are taxed on the same tax rate as anyone else. Pub 550: Special rules for securities traders.

Share this post


Link to post
Share on other sites
If trading is your main source of income (ie if it's your primary business and you run it as one), you don't pay self-employment taxes and your profits (after business expenses/deductions) are taxed on the same tax rate as anyone else. Pub 550: Special rules for securities traders.

 

Trading does not have to be your main source of income. You need to be able to prove to IRS that your trading activity amounts to business. 1000 trades per year is an important baseline mentioned in various sources, but this is not a hard rule.

Share this post


Link to post
Share on other sites
Trading does not have to be your main source of income. You need to be able to prove to IRS that your trading activity amounts to business. 1000 trades per year is an important baseline mentioned in various sources, but this is not a hard rule.

 

The key here is being able to show it is a business and not a hobby.

 

Here is the subsection in Irs Pub 550, page 76.

 

Special Rules for Traders in Securities:

 

Special rules apply if you are a trader in securities in the business of buying and selling securities for your own account.

 

To be engaged in business as a trader in securities, you must meet all the following conditions.

 

• You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation.

• Your activity must be substantial.

• You must carry on the activity with continuity and regularity.

 

The following facts and circumstances should be considered in determining if your activity is a securities trading business:

• Typical holding periods for securities bought and sold.

• The frequency and dollar amount of your trades during the year.

• The extent to which you pursue the activity to produce income for a livelihood.

• The amount of time you devote to the activity.

 

If your trading activities do not meet the above definition of a business, you are considered an investor, and not a trader. It does not matter whether you call yourself a trader or a “daytrader.”

 

Note. You may be a trader in some securities and have other securities you hold for investment. The special rules discussed here do not apply to the securities held for investment.

 

You must keep detailed records to distinguish the securities. The securities held for investment must be identified as such in your records on the day you got them (for example, by holding them in a separate brokerage account).

 

It goes on to discuss how to file in such circumstances, and the need to make a mark-to-market election, etc.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • VRA Vera Bradley stock watch, pull back to 5.08 support area at https://stockconsultant.com/?VRA
    • MU Micron stock watch, pull back to 102.83 gap support area with high trade quality at https://stockconsultant.com/?MU
    • ACLX Arcellx stock watch, trending at 84.6 support area with bullish indicators at https://stockconsultant.com/?ACLX
    • Here’s something few are talking about: The Chinese are printing money like it's going out of style. Not that you'd hear about it in the mainstream news. But Bitcoin knows.   Bitcoin always knows.   Here’s the thing…   When the Chinese government prints money to paper over the cracks, their smart money doesn't sit around waiting to get devalued.   It usually flows into three things: Bitcoin, gold, and dollars.   After years of being beaten down, gold's having one of its best years in decades. But here's the secret -- whatever gold does, Bitcoin's going to do it bigger.   Much bigger.   Since last November, when China started their printing spree, Bitcoin's been moving in near-perfect correlation with the People's Bank of China's balance sheet. Over 80% correlation, maybe even 90%.   Again, few are talking about it.   But here's why this matters right now: This could be the beginning of a huge breakout in the crypto markets.   Bitcoin broke above its July high, and historically, that's led to new all-time highs over 90% of the time. The only times it failed? COVID and the 2022 bear market.   That's it.” – Chris Campbell   Profits from free accurate cryptos signals: https://www.predictmag.com/     
    • Originally Answered: How can I compete with people who are better than me in every way?   So you want to outcompete people who are smarter, better looking and more experienced than you?   No problem!   All you have to do is outwork them.   Will Smith said, "if we both get on a treadmill either you're going to get off first or I'm going to die trying."     Most people just aren't willing to work that hard. Sure, they'll show up for the job interview and maybe practice in front of the mirror for a few minutes, but they won't do hours and hours of research and prepare for weeks. They won't wake up early and stay up late working on their dreams.   So while all those smart, good-looking, experienced people are waiting around for the next opportunity to come their way, you can outwork them and create your own opportunities.   In a few years, you'll be that "smart" person everyone looks up to. But you'll be different. You'll know it was your hard work, your inner strength and your commitment to living a great life that made you successful and brilliant - not luck or good genes.” – Tom Corson-Knowles, Quora Profits from free accurate cryptos signals: https://www.predictmag.com/   
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.