5 Things to do as a Day Trader for Tax Planning Purposes
Published: Wed, 01/09/19
5 Things to do as a Day Trader for Tax Planning Purposes
Here's some important tax tips for traders for the new year.
If you need assistance in preparation, filing, or anything tax related. Feel free to contact my favorite accounting firm. In some ways I was very lucky to marry an accountant. Courtney has been doing my taxes for the past 16 years. She has dealt with all the issues a full or part time trader would have, and believe me I had them all. She now specializes in taxes for traders. Please contact here below if you have any questions on taxes ect.
If you do end up using her services and are a DayTradingRadio member please mention that to her. (10% Discount)
1) Consider a tax trading entity. The “Tax Cuts and Jobs Act” bill passed in 2017 and this bill includes a deduction for pass-through entities. Taxpayers with service businesses such as day traders may qualify for this deduction if their qualified business income is under a threshold. If taxpayers are above the threshold, they may want to consider forming a C –Corp, depending on the state you live in. Entities such as S Corporations unlock multiple deductions for traders such as health insurance and retirement plan contributions.
2) Make the IRC Section 475 (f) Mark to Market election, if you qualify for trader tax status. This election needs to be filed by April 15th, 2019 if you are a sole proprietor for the 2019 tax year. If you are forming a new entity in 2019, consider making the election through your business. The mark to mark election reclassifies your gains and losses from your day trading business from capital to ordinary income/losses. You are also no longer subject to the wash sale rules.
3) Figure out whether you will take the standard deduction or itemize. Tax filers can either itemize their deduction or take the standard deduction allowed by the IRS. For 2018, the standard deduction is $12,000 for single filers and $24,000 for married filing joint, $18,000 for head of household. If you are close to exceeding the standard deduction amount, I would recommend accelerating deductions into 2019 from 2020 to receive the benefit.
4) Consider contributing to a retirement plan. You can contribute to a Traditional IRA or Roth if you meet certain requirements. IRA contributions are due on April 15, 2019 for the 2018 tax year. Sep and Keogh plans are due when the return is filed including extensions.
5) Contact a specialized accountant as soon as possible to plan for 2019 and maximize deductions for 2018.
Courtney Kurisko
Certified Public Accountant