Trading is stressful enough.....Your taxes shouldn't be! Ph: (813)746-8208
E-Mail: info@TraderTaxCoach.net

Trader Status

If you engage in a great deal of short term trading (day trading and/or swing trading), you may qualify in the IRS's view to claim trader status on your tax return. By claiming trader status, you create more deductions on your tax return, potentially saving yourself thousands of dollars in taxes each year.

Are You A Trader?

The word trader has a special meaning in the tax law (IRS Topic 429). It refers to someone who trades to profit from daily market movements in prices of securities (not long term appreciation or dividends and interest). They trade with substantial volume and consistently over a long enough period of time.  The biggest problem with trader status is the absence of a clear definition (the IRS gives us no numbers to go by). In fact, most of what is used to define trader status comes from the court cases over the years.

There are no precise standards telling us when traders are considered short term, or how large a volume you need, or how long a period you must continue the activity to be considered a trader.

Trader Status Evaluation 

If you are not sure if you qualify for trader status, fill out this evaluation and submit it to us. We will evaluate your status and give you a half hour consultation for free. Plus if we prepare your taxes, there is no extra cost for us to establish your trader status and fill out and file the mark to market election forms. PLEASE MAKE SURE YOU SUBMIT YOUR NAME AND EMAIL ADDRESS SO WE HAVE A WAY TO GET IN TOUCH WITH YOU WITH THE RESULTS!

Name:
E-Mail Address: (REQUIRED)
Phone Number:
What Type Of Securities Do You Trade?
How Often Do You Trade?:
How Many Trades Do You Make On Average During That Time Frame?:
What Is Your Average Holding Period?:
How Many Hours Per Day Do You Spend Actively Trading During Market Hours?:
How Many Hours Per Day Do You Spend Analyzing or Studying The Market?:
Do You Have Another Source Of Income?:
How Many Hours A Week Do You Spend At That Job Or Business?:
What % Of Your Total Investable Assets Are In Your Trading Account?:
Do You Maintain A Separate Brokerage Account For Your Long Term Positions?:
What Is Your Security Selection Process?:
Do You Hire Outside Money Managers To Manage Your Trading Account?:
Questions / Comments:

Tax Benefits

If you qualify for trader status, you're likely to be able to claim more deductions than an investor. Some deductions that would be claimed as itemized deductions subject to various limits will be allowed as business deductions without those limits. There are even some deductions traders can claim that investors cannot!

For a sample list of Trader Tax Deductions click here.

One of the most beneficial aspects of trader tax status is the ability to claim mark to market accounting. If you make this election, your trading losses won't be subject to the $3000 capital loss limitation. Instead, your capital gains/losses are treated as ordinary gains/losses. Ordinary losses don't have a limit and can be used to offset any income. This is a huge benefit for a trader who has a bad year. For more information on the mark to market accounting method click here.

Filing As A Trader

The good news is there is no formal election to make to claim trader tax status. You'll place only your expenses on Schedule C (Income and Expenses from a Business). Your trading gains/losses will go on a Schedule D. This will look very strange to most tax professionals as they don't understand trader taxation rules but this is how it's done.

There are special forms to fill out by certain dates if you want to make the mark to market election.

We don't advise going it alone. If you make one mistake, the IRS can deny your trader tax status or mark to market election, costing you thousands of dollars in lost deductions.

Trader Tax Coach can help you with the following services:

  • Establishing trader tax status
  • Electing mark to market (IRC Section 475) & filing out the appropriate forms
  • Trader entity consultation
  • Trader Entity Formation
  • Trader Tax Preparation
  • Tax Planning to maximize your deductions
If you have any questions on trader tax status or any other tax related issue, please contact us at 813-746-8208 or use the form below to contact us by e-mail.

Contact Information

Thank you for your interest in Trader Tax Coach. We will respond to most inquiries within 24 hours from the time they are received. 

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