I am day trading stocks, how much money do i need to make when i trade a stock in order to avoid a lot of tax?

Question

Lets say i bought one and sold one made $75 after comisions -$14=61 now if i do this everyday how does it affect my taxes?

Answer 1

well, let's see, you've just made $61 profit, which will be subject to taxes. If you don't make a living doing it, it will be taxed as capital gains, but if you hold the stock for less than 1 year it will be short-term capital gains, which is taxed at your regular tax rate instead of the more favorable long-term capital gains, which are taxed at a maximum of 15%. And some states tax short-term capital gains a lot more than long-term capital. Massachusetts for example taxes short-term capital gains at 12% and long-term capital gains at 5.3%. Now, if the day trading is your job, then your profit on selling stocks will be subject to regular income tax and also self-employment (SE) tax, which is 15.3% of 92.35% of your profits. You will need to keep track of all your profits and expenses in that case to accurately report your business income.

Answer 2

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Answer 3

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Answer 4

When you trade, you implicitly assert that you are willing to take on risk. This risk is something which cannot be eliminated, and in a day trading scenario is a bit harder to manage. The most basic rules would be to put stop loss orders for an acceptable level of loss you are willing to take on the downside, and not let emotion or sentiment about the stock affect that. On the upside, it is always good to know what is an acceptable level or return, and set triggers to sell atleast part of the holdings that point. There are a variety of methods and strategies you could employ to manage risk. You can look at hedging your positions with options, and a good reading would be the book 'Options Futures and Other Derivatives' by John Hull.

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Answer 5

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Answer 6

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Answer 7

If you're truly day trading you'll have to "mark to market" at year and and recognize any gain on the shares in your portfolio even if they are unsold.

As a day trader, if you're holding anything for long term gain, be SURE to keep your long term holdings separate from your day trading holdings! If you don't, the IRS will automatically mark to market those as well which can cruciify you at tax time!

Answer 8

I'm gonna be blunt...if you have to ask this question your in the wrong business.

A 'day trading' of stocks doesn't make you a "Day Trader"...it only opens you up to more tax regulations.

Since you are 'day trading' I assume that you know what a wash sell is...and the tax effects. Oops, my bad...your still asking about short term capital gains.

I haven't even mentioned straddles and hedges yet...and their possible tax effects.

And, if you don't know these terms...don't think that you can't create them without knowing what you are doing.

Just a friendly bit of advice...if your are 'day trading' you need to know the tax rules first. I am an Enrolled Agent...and even with this expertise after you make a mistake the only thing I can do to help you would be try to abate penalties.

I am sure that you have read the answer to your question already; but, in case you haven't if this is the only trade you would owe tax on $61. But, it could be more, less or the same if other trades are involved.

Like I said you need to know the tax rules before you ever start to 'day trade'. Think about it...you wouldn't sit down at a poker table without knowing the house rules would you? It is the same thing.

Answer 9

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Answer 10

why oh why does folks want to avoid paying there fair share of taxes and worry so much about it? i would love to say next year my total tax bill was 8 trillion dollars and i made it all in the stock market.