Taxes and trading

Discussion in 'General Discussion' started by Tps, Apr 6, 2015.

  1. Tps

    Tps Guest

    I had a couple of question regarding members' strategies when it come to managing their options business as it relates to taxes:

    1) Do any of you use Green Tax Trader to actually prepare your taxes, and if so, what has your experience been?

    2) Do any of you claim tax trader status. I'm curious as to the benefits/pitfalls of such?

  2. ACS

    ACS Well-Known Member

    Trader status requires quite a bit of activity, something day traders have but monthly income option traders usually don't. One thing I do to make things easy is to only trade options that are 1256 contracts.
  3. meyer99

    meyer99 Well-Known Member

    This is from a few years ago but still applicable.

    Attached Files:

  4. Andrei

    Andrei Well-Known Member

    I use them, mostly because I have some complex foreign taxes. My experience is generally positive, although they are not cheap. I have used some other preparers in London and in the US and Green have better understanding of traders' issues and a bit less expensive.
    Traders status require: 1. frequent and regular activity in you accounts (IRA not included). There are no firm numbers, but we are talking about 1000 trades per year, trading 4 days per week. The good news is that each leg counts. 2. Substantial funds commitment , my GUESS that trading 10-lot B'flies as in M3 should be enough.
    The main benefit- you may be able to deduct a lot expenses.

    Green Company have some more detail on their website:
  5. Trader G

    Trader G Well-Known Member

    I just came upon this but I agree 100% on the 1256 contracts. I have spent the past few months trying to determine different ways to diversify over different vehicles and what I realized that if I just concentrated on RUT I could simplify my life. As for diversification, when things hit the fan almost everything seems correlated so I have been spending energy on what can I do to hedge my positions within RUT. The tax benefit is something I think a lot of people don't realize is a bona fide edge compared to the individual stocks/etfs.
  6. Andrei

    Andrei Well-Known Member

    I don't think you need to be a day trade to have enough trades to qualify. Each leg in a complex trade will count as a separate transaction. The key is frequency, i.e. something around 4 days per week with trades. But if you trade more than one strategy, it should be possible, even if all you trade are index options.
    Green Trade tax website has a lot of good information on that. Benefits can be pretty substantial with the Trader Status.
  7. Venkat

    Venkat Guest

    I did consult with Green Trader Tax and went through their entity formation service as well.

    1) I am planning to go through them for my tax preparation this year. There are many nuances such as determining the optimal earned income, determining the best benefit plan, establishing elections such as MTM and establishing the profit transfer plan between your capital management company and trading company (applicable in my scenario). I don't know of any other CPA that can do these things without raising a red flag with IRS.

    2) According to Green Trader Tax, I do qualify for Tax Trader Status and I intend to claim it. Primary benefits: Appropriate expenses can be claimed as business expenses rather than investment expenses, section 475 MTM can be elected for non-1256 trades and health insurance premiums & retirement benefit contributions can be deducted from gross income. If you qualify, you can even shoot for defined benefit plan. Retail Trader ==> Entity Formation ==> TTS.

    Everybody's situation may be different and some of the benefits of TTS may be available even to business traders that incorporate. I wanted to start in the right direction with my trading business and I am glad I got in touch with Green Trader Tax. Hope this helps.
  8. Hugh

    Hugh Well-Known Member

    In Australia a person who has been designated as a trader by the tax office can offset trading losses against other income. Trades need to be complex, frequent, substantial etc. I.e not an investor. I use an accountant to lend validity to what I'm doing and ensure the right tax treatment.
  9. Kevin Lee

    Kevin Lee Well-Known Member

    Just for info .... the best place to run a trading business that I know of is Singapore and Hong Kong. Zero tax on capital gain. So legally income from trading options is tax free. The trade off though is time difference.
  10. Gabor Maly

    Gabor Maly Well-Known Member

    Kevin, I guess that means that you get up in the middle of night, check your position, adjust and go back to sleep? At least you are getting paid for it, no tax is really amazing.
  11. Kevin Lee

    Kevin Lee Well-Known Member

    Yes Gabor,

    I stay up till about 1 or 2am, which is 1 or 2pm ET on days I need to do adjustment. I just shift my sleeping hours. Not a bad trade off for not paying tax. :)
    Gabor Maly likes this.
  12. tom

    tom Administrator Staff Member

    There's no tax on trading income in Belgium too. Trading hours are 15:30 to 22:00 Central European Time (CET).
  13. Gabor Maly

    Gabor Maly Well-Known Member

    Is anyone trading out of an offshore company? Some of these can be set up at a quite reasonable price I wonder if anyone has any experience with it.
  14. Vijay

    Vijay Member

    GreenZone likes this.
  15. emeric

    emeric Guest

    Are you sure about that Tom? I heard that if you trading is the main source of income then it will be taxed. If it is not your main activity and just an investment, then it is not taxable.
  16. Bruno

    Bruno Moderator Staff Member

    Are you sure Tom !!??!? If true, it is worth investigating. Not that I am too bothered myself ;) but always good to know.
    I believe Botswana (for African nature lovers like me) is to be considered too (no tax on foreign income).
  17. tom

    tom Administrator Staff Member

    I did a little research now and it seems if you are a professional trader in Belgium you pay normal taxes. The no tax on capital gains is likely for non-professionals. Here's an interesting thread I found on the subject:

    Here's a quote from that thread:
  18. Bruno

    Bruno Moderator Staff Member

    Thanks Tom, I read the whole thread and it sounds indeed like the jury is still out on that one.
    From what I have read elsewhere, UK non-doms only pay tax on the amount they remit in the UK (for the 1st 6 years at least). That might be a solution.
  19. Georges

    Georges Well-Known Member

    If you run a trading business in Singapore and you live in another country,
    then you need to pay Taxes on your capital gain from Singapore in that other country where you live?
    Kevin Lee likes this.
  20. Capt Hobbes

    Capt Hobbes Well-Known Member

    In that case it's not about Singapore, it's about tax laws of that other country. If it's the US and it's personal tax you have to pay tax on worldwide income. As a matter of fact, Uncle Sam taxes citizens regardless of residence, so if you are a US citizen who lives in Singapore and never even sets foot on the US soil, you still owe US capital gains tax on your trading gains in Singapore.
    Kevin Lee likes this.

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