Don't Make These Mistakes! Taxes for Day Traders
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- Опубліковано 25 чер 2024
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0:00 Intro
00:28 Short term vs long term capital gains
3:23 Wash Sales
6:55 Mark to Market Accounting
12:18 Tax free vs tax deferred
15:33 Closing
#daytrading #warriortrading #rosscameron #stocks #learntotrade
Warrior Trading // Ross Cameron // Day Trade Warrior - Розваги
Ross is the financial literacy teacher we all needed in back in school 🏫 growing up!
Literally doing my taxes today so I needed this information. Thank you 🙏
You're welcome!
After talking with a CPA one thing that might be helpful to others is the concept that your money made day trading in a non retirement account is simply capital income and losses OR ordinary income and losses. If you elect to go trader status and mark to market it all becomes ordinary income and losses and can be deducted if net negative on trading year or added to other ordinary income if you work another job with a W2 or own another business and if net positive trading on the year.
If you leave it as capital income and losses then only $3000 in losses per tax year can be deducted against ordinary income (any remainder amount does carry forward to next tax year). In my case as for some others probably I don't have any other capital income outside of trading so if I take a $10k trading loss for a year only $3k of it can be deducted against my normal employment income per year. Compare that to if I took a $10k loss in trading as a mark to market elected trader and I had another salary from normal work of $75k then I can write off the entire $10k trading loss against my normal job income. Hopefully that helps someone else. Thanks for making the video Ross
Always good to reach out to a CPA for information on your specific situation and what may work best for you. Thanks for sharing.
I am not working any other job, do not have any other income. Only had short-term gains from stocks. Do NOT have Mark-to-market status.
Can I not deduct my whole 10K short term losses from next years short-term gains of 20k?
I think I can. Because that’s what Schwab’s website says giving an example.
Yep, I heard the same thing, plus, you stated it very well.
Great video Ross! I was starting to look into this as I move to full time trading and this has helped immensely! Thanks again for what you do for the trading community!!
Should o open an LLC?, how to?
You're welcome!
Thanks you for your help.
You're the best. Thank you for this!
You're welcome!
Thank you! This was very informative!!
You're welcome Jon!
Fantastic! Thank you, Ross!
THank you Ross. Very helpful info and tips; as always.
You're welcome!
Always good content thank you Ross!!!
You're welcome!
Thank you Ross, I and many others needed to hear these advices. I know I've heard you mention this all before in your pro classes but it's been awhile since I took the course. And I needed the refresher
Hi there , I'm curious how we're the classes. And how helpful they have been to your p&l? Thanks!
Alex.
You're welcome!
ROSS I absolutely 💯 ❤️ this video! I actually was gonna ask you about this very topic! That's sooo 😎 thanks bro👊❤️🎯
You're welcome Charles!
Thanks a lot for the info🙏🙏🙏🙏
You're welcome!
Never heard of the Mark to market .....THANK YOU!! Don't know what we don't know.
You're welcome Susie!
Thank you for sharing!
Hey Erica! You're welcome 🙂
Thanks Ross! Very informative!!
Thanks for watching!
@@DaytradeWarrior ..my fiancée and I took your class last summer during covid(2020). I learned alot. Did the simiulator everyday etc... Finally have my money and im ready to get into it.....slowly! Happy Easter!
Thanks! I have been waiting for this.
You're welcome!
great video Ross! this was really helpful
Thank you!
Thank you Ross!
Followed
You're welcome Ross!
Video full of value, thanks Ross!
You're welcome!
i really appreciate the insight
Thank you!
Another key note is not all day trades are taxed the same. For examples, day trades on Futures are not taxed the same as day trading stocks. There's a completely different form to file commodities on. Plus, there's other ways to reduce your trading taxes with traders tax status, as Ross mentioned in the video.. The key is to make sure you speak with a CPA that specializes in taxes on the market you trade. Generalist CPAs (Like the one's you'll find at places like H&R Block for example) are best with regular W2 employment. Outside of that, seek the specialists and shop around before making a decision.
***I'm not a CPA***
FANTASTIC video sir. The sentiment here is great for the trader/investor.
Great video!
Thank you!
Good video Ross. Everyone needs to find a CPA with experience with Day Traders. I made the mistake of using a CPA who was not knowledgeable of the various was a person could day trade, and the various tax laws. A knowledgeable CPA, is worth the cost. Like you said we all have different requirements, but if people are consistently successful and profitable trading is an IRA is a great way to go to save tax dollars.
Thank you!
Some etf's like inverse ones are not tradeable from within an ira.
Ross, Thank you! You always put out helpful information. Cheers!
Thank you much Ross !!
You're welcome!
Thanks !
Thanks for watching!
My most sincere gratitude for sharing your hard earned knowledge in this video Ross!
Ross,
in plain and simple language, what is the relation among: Proceeds, Cost basis and wash sales? I know there is a little math involved in this.
If anybody else knows the answer to this, please feel free to to reveal it and I will seek professional help regardless before making any big decision.
Thanks to any applicable party in advanced!
Great video! Thank you for this!
Glad you enjoyed it!
Thank you. Nice shirt.
Ross!!!! No one every told me about mark to market. Thanks man!
You're welcome!
Thanks Ross. I'm joining WT soon and taxes are something im gonna have to deal with.
Thanks for watching!
Great video Ross
Thank you!
Thanks Ross
For those that want to file as Mark to Market for 2022 taxes you need to mail in the irs request forms by April 15th.
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Do you know how to find those forms?
Call any CPA and they'll be happy to tell you. Download and print, or some will give you the form for the asking
After 2 years today is 15 aprl
Great video
Thanks for watching!
Just want to say thanks for giving back to youtube community by coming out with these smaller lessons lately. Really helps!
You're welcome!
Thank you Ross for all your content! Is there a brokerage that allows you to trade in a HSA account?
Ross, great video as always. Is there a link to the video that's all about setting up a backdoor Roth IRA? Thank you!
Green Tax Service for traders would be a good resource. There is a video under the YCT UA-cam channel.
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Thanks,, Ross!
You bet!
What is your opinion about self proprietorship?
Ross the GOAT 🐐 notification bell turned on
Thanks for watching!
Hi Ross, thanks for taking the time to make this video, highly appreciate it as I have been struggling with my taxes for a while. I have an issue though: I have not received a confirmation from IRS regarding the mark-to-market election that I filed last year with my taxes. And as a result I still have wash sale losses. What should I do about this?
It would be best to check on this with your tax specialist
They might not with how busy they are. And there's something else they require to file- form 3115, to change accounting methods, tho if you don't file it that won't invalidate your election, they say. Read tax topic 429. Headaches.
Thanks very much for your video. Extremely helpful and concise. Quick question about daytrading losses. Obviously, if you are an active day trader (and there is no question as to your status in that regard) you would pay your income rate on your gain. As per your example, if you made $100,000 daytrading, you would pay $20,000 ( or higher de[pending on rates etc) in income tax. My question is, if you have $100,000 loss, do you reduce that from your taxable income and in essence get $20,000 of that back? Thanks very much
Thank you Ross for the videos, just wondering if these taxes are just applying to US accounts?
Correct! Tax rules will vary depending on where you live
Thank you for this Ross! Watching now.
You're welcome!
Thank you Ross!! great!!!! really appreciate
You're welcome Stefano!
Important video! Last Friday, I purchased some stocks during market hours at $1.05. It showed up the same value before market closed. When I open my account next morning (Saturday) I followed that the purchased value is changed to $1.27 per share. I spoke to the broker about it. They said, it happened because of wash sale. I am suspicious about the price change during market closed hours. My question is that if it is for wash sale why they allowed me to buy at market value $1.05 and after that they changed value in off market? The price difference seems to be very high too. If any advice please share.
Thank you Ross. your video is very helpful. Is Roth IRA acceptable for day traders specially if you are over 60? Thanks
Yeah, it's always a good thing to save for retirement. You're welcome!
great video thanks. one side question. what is the best U S broker for future?
and what is best off shore broker for future?
Lightspeed: www.warriortrading.com/lightspeed-trading-review/
These are two offshore brokers that people in our community or our educators have used that you can research.
For accounts under $25,000 (as little as $500), you can take a look at CME Group (US and all international residents except Canada).
CME Group review: www.warriortrading.com/capital-markets-elite-group-review/
CME Group website: cmelitegroup.com
For accounts under $25,000 Minimum deposit of $1000 available to anyone outside of the USA except Canadians:
TradeZero review: www.warriortrading.com/trade-zero-broker-review-how-it-matches-up/
TradeZero website: tradezero.co/
TradeZero WT rebate program: www.warriortrading.com/tradezero-broker-rebate-program/ (Keep in mind that participation in a Broker Rebate Program is not required to trade or to be a member of our community. Rather, they can be an opportunity to receive discounted commission rates if any of these brokerages are a good fit for you.)
This article can be a helpful resource for exploring your options for day trading with less than $25k! www.warriortrading.com/how-to-day-trade-without-25k/
What great content! Thank you Ross for posting this. Just out of curiosity, why do you trade in a retirement account and a regular account? Obviously, you don't have to answer but I am just curious as to what the merits/demerits are (other than having to wait until you're 60 years old to withdraw from the Roth IRA) for using both types of accounts. Thank you for your time!!
Because he can even withdraw out of a roth and pay alot less taxes and withdraw tomorrow without paying as much as a regular account
Yeah I think the penalty is 10 percent for pulling out a roth early plus it counts as income for that year, but if you've been growing it like crazy for 5 or 10 years the amount of money you will get in the end is a lot higher than trading normally
AWESOME Vid - Over 60 but I still may look into that Trading in an IRA Account or ROTH IRA??
Thank you!
This was my first year doing taxes after having my account officially flagged as a PDT. I had some gains in Crypto, and some losses in Stocks, which I was fine with the losses because it was going to even out my crypto gains a little. I had no clue on wash sales and they hit me. I guess it could have been worse from looking into it now. I had figured my tax data was wrong, but it wasn't. It was the wash sales. I will definitely be looking into mark to market and will prepare better for taxes next year.
Sorry to hear that, but we're glad you were able to learn from the experience!
Can you still claim those Wash sale Losses???
How many trades did you make that year? I'm just realizing now in my first year of trading that this wash sale rule may bite me come tax time next year.
Very helpful!! Did you interviewany CPA's prior to settling with the one you have or did your broker suggest the CPA? Just curious and thanks.
Thank you! We had to find one.
@@DaytradeWarrior gotcha. Thank you for the reply.
Ross thank you for knowledge and time that u provide to the trading community.
If I go in and out of a particular stock to take profits ( no loses ) and buy the same stock as it keeps on climbing and perhaps increasing my position, will that constitute a wash sale even though I have not lost any money ?
Based on the wash sale definition yes. That said, it's important to reach out to a CPA knowledgeable in trading transactions that can help with your specific needs.
@ 5:15 the taxable is $110,000? (100k + 10k wash sale disallowed)?
I thought the wash sale off-sets? I thought that wash sale would be absorbed so the new cost basis would be a taxable gain of $90,000.
Please correct me if I'm wrong
The wash rule your were trying to explain is you can’t sell then rebuy a similar stock in the same sector like, Exxon then Chevron, or sell Home Depot then buy lows with in so
Many days or or say two similar tech companies that both do cloud or manufacture software
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Your broker is only going to apply wash rule to same CUSIP stock/etf, not similar ones.
Ross is an amazing teacher. Everything is so concise and comprehensive. Subbed.
Thank you very much!
Guys , Ross missed something important and that is $3000 limit. You cant deduct capital losses over $3000 per calebder year....So MTM not only clears wash sales but also removes $3000 limit on yr losses...
Sure about that - I thought you Couldn't GO OVER more than $3000 losses and the remainder had to be added to the carry over??
AE: so if you had $50k in previous losses. and you loss $25K the next year. you CAN deduct the whole $25K + 3k More, then Carry over balance is now $22K
He literally said that...
Great clip Ross.
Thank you!
I’m 14 yrs old trying to learn how to do taxes and learn how to create a llc for my future self so I could already know how to do these stuff before I grow up and this video help a lot thanks!
Warrior Trading cannot provide support or services for people under the age of 18. As such, we won't be able to help you with your query. It is important to note, if you're under the age of 18, you won't be able to legally trade. However, you could still open what's called a custodial account with the help of a parent or guardian. You can ask a parent or guardian to read more on custodial accounts here: www.warriortrading.com/5-things-to-know-about-custodial-account/
I hope this is helpful. Please feel free to email us back once you are eighteen and we would be happy to help you further.
Ross you didn't mention if you filed as Mark to Market? I've been keeping a log of losses so I know not to trade them depending on the size of loss. Mark to Market sounds like the way to go but I'm not making the big bucks yet so it wouldn't really make sense to form an LLC just yet.
Smart. I was trying to think of what do before my mark to market paperwork passed 👌🏻👌🏻
Great info Ross. Thanks 🙏🏼
You're welcome!
Great video Ross however I wish you put more info in regarding 475f - Mark to Market election. There are a lot of rules that need to be followed or you will put yourself in a very bad space. Also removing the election is difficult and requires even more specific rules which I feel you should cover as many people will not survive day trading.
Thanks for mentioning that, I’ll make a note to add to next time I teach the class.
I think to get approved you need to meet some requirements. One of those requirement is 750 to 1000 trades per year???
I also saw a video years ago of the Problem with MTM on how your account is now handle. Meaning you can't carry losses to the next year, you have to claim all losses or gain at the end of the year?? Not sure exactly how that work.
I have not applied but I'm Still doing Research on TTS - which may be a better Path I think that also has to be filed at the IRS..
and same requirements And may solve the Deferred losses??
Do you teach how to start your own day trading business?
The short term capital gains cannot be moved to a 401k, A 401k is with your employer and the money you earn from them.
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was just wondering about this a few days ago. right on time.
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Nice to laern from you
Thank you!
I've never had broker list wash sales as "exempt" only disallowed.
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At what point in your trading career would you talk with a CPA? The studying or activity trading part?
Once you commit to trading with real money. In sim it doesn’t matter, but with real money, do you want to make sure you’re doing it right and not setting yourself up for a surprise
Hey Ross, great vid! To apply to mtm can you apply right off the bat without having made any trades or do you have to trade for a little bit to build up a trade history before you can be eligible for MTM? I would like to start day trading soon and don’t wanna have to worry about wash sales so kinda wanted to get everything lined up before actually trading with real money. Thanks!😁
Thanks for watching!
Did you get the answer ? Look like I am also in same boat. Please share the information if you have it
I think to get approved you need to meet some requirements. One of those requirement is 750 to 1000 trades per year???
I also so a video years ago of the Problem with MTM on how your account is now handle. Meaning you can't carry losses to the next year, you have to claim all losses or gain at the end of the year?? Not sure exactly how that work.
I have not applied but I'm Still doing Research on TTS - which may be a better Path I think that also has to be filed at the IRS..
And may solve the Deferred losses??
File the taxes but don’t pay it. Then tell them you can’t pay It. They cut you deal. Pay them the deal. Simple.
Thanks for watching!
Ross, Is Tax Trader Status and Mark-to-Market the same thing? I am a bit confused on how to apply for Trader Tax Status with IRS and if it is the same thing as Mark-to-Market? Thanks for the info!
Yes, those are the same thing! Ross talks more about the subject in our classes. If you haven't had a chance to attend yet, one of the best ways to learn how to get started would be to join us in our next day trading class. The class is free to join, and you will receive a copy of Ross' best selling ebook "How To Day Trade" just for sticking around until the Q&A! You can learn more and register here, if you're interested: www.warriortrading.com/free-day-trading-class/
@@DaytradeWarrior Hum, I thought they was different??? I thought You had to Actually Select MTM when you apply for TTS
Thus I haven't Applied because I thought the two downsides was as MTM you can carry forward any losses, and as TTS you get taxed at the higher rate??
What do you mean by buy back the “position” ? Whats position?
Ross, are you persoanlly mark-to -market accountinng? are there any cons if one elects MTM?
I enrolled in it years ago, I’m not aware of any downsides
This was the closest I've come to understanding the wash sale rule as it applies to day traders, so thank you for that. But I'm still so confused how it's applied to people taking short positions. 31 day, December 31st? What when where how why and huh?
Of course, happy to help. A CPA that deals with trader tax is the best place to go for more detailed answers.
Day Trading beginner under 25k account and wash sale rule. My question is this, let’s say I execute 3 round trips on the same stock within the rolling 5 days, as a new day trader, the brokerage is going to add my losses to the next trade per share since I didn’t wait the mandatory time Frame. Is have a Mark to Market account the way to avoid this?
I ask because what if I were to execute a trade based on the movement of 10 cents per share and the wash sale rule prevents my cover for the position I want to enter at?
Not sure if I explained my concern of the wash sale for day trading the same securities correctly, and perhaps the Mark to market account eliminates that concern.
Also new to your UA-cam Channel today and have been watching all morning. Great information and I have been taking notes all morning.
That would be a good question for your broker! Thanks for watching 🙂
Would love to set up a call with you over zoom. To see where I can improve in trading
If you haven't had a chance to attend yet, the best way for you to learn more about trading and how you can get started would be to join us in the next live Warrior Trading webinar. The webinar is free to join, and you will receive a copy of Ross' best selling ebook "How To Day Trade" just for sticking around until the Q&A! You can learn more and register here, if you're interested: www.warriortrading.com/free-day-trading-class/
What’s a good video on how to trade in a Roth IRA and what happens when you want to withdraw? And if you have a job how do you go about filing your taxes
You can check out this blog for more info - www.warriortrading.com/how-you-can-day-trade-in-your-ira-account/
Watch out for wash sales OMG.
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A key point regarding wash sales that I don't think you mentioned is that a wash sale will be triggered only if you sell (for a loss) then buy back within 30 days. There's some other caveats as well, but there's a couple decent youtube videos on just wash sales, search for them.
Yes thank you that’s correct!
He clearly mentioned that....
Ross I have a question…
CMEG is a foreign company and they only give you the executions info, they do not give any sort of 1099 or anything like that. Are you just declaring the difference of losses and profits?
Carlos, we recommend reaching out to a registered CPA for help with taxes.
Ross, where can i get that shirt? seriously cool
Brendon, email out team and we'd be happy to help: team@warriortrading.com
Wash sale : what happens if
I have 1000 shares that hold a 20% unrealized loss. I buy an additional 1000 shares. And 2 days later I sell 1000 shares.
Will this be a wash sale? Or do I get to use the 20% loss against my taxes?
bro how do you have a video for every question i have
Can you do a video in Mark to market account?
Ross let's professionals handle that sort of thing as tax questions will depend on your individual circumstances. We recommend reaching out to a local CPA in your area to get more information. All CPAs should be knowledgeable about trading transactions, but be sure to confirm if they have dealt with these kinds of situations before.
Do you recommend trading through an llc or llc taxed as a s corp?
Imo s corp is better
E*Trade provides wash sale amount per each stock the day after the transaction and keeps cumulating it.
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Will I be stuck paying taxes on the Gains column there or the Deferred Loss Column? We have no CPA's within 110 miles of me that can help. This is my first year and I am panicked. Thank you
Did you create a LLC or Corporation for your business? I've been profitable for a few months now, so trying to figure out which route to go.
I did a corporation, but I’m a big advocate of using a Roth IRA!
Not a CPA but I do know that Roth IRA is not tax free. The difference between Roth ira and traditional ira or 401k is that you need to pay the taxes for the cost base you purchased the stocks at and it depends on your bracket.
The benefit is that after year of compounding when you retire and start using the money you already paid the taxes on it.
I paid tax when I deposited my original 6k into the Roth IRA, but that’s it.
@@DaytradeWarrior yes that's what I meant. Sounded in the video like it's tax free...
Thanks for your amazing content!
@@DaytradeWarrior how do you qualify for Roth IRA when you make a lot of money day trading. There is a limit if you make to much money you don't qualify for a Roth IRA
In order for your Roth IRA to be completely tax free it needs to be opened under an LLC. Then all the money deposited and all the gains are completely tax free! Read Tom Wheelrights book on Tax Free Wealth.
I don't think you can use short term capital gains from stocks as income in an ira as its not considered earned income.
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Trade within a Roth IRA and more than 59.5 with account opened at least 5 years and there are no taxes. EVER.
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Does Mark to Market accounting require a business entity? My loss write-off this year was limited to $3,000 against my regular income. Would I have been able to personally deduct more if I was Mark to Market?
Yes
are you paying taxes in the end of the year or like when yoy employed you should pay on monthly base ?
Depends on what works best for you!
Move to the Netherlands since capital gains are not taxed and instead, your whole account is taxed at 1,5% of your total account value each year.
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Still have to pay taxes as Americans after a certain threshold.
That doesnt sound preferable. Your account is taxed yearly whether you make money or not?!
@@memoryrinehart4452 everything above 50k, yes. But if you are profitable you are living in a tax paradise
Does an llc have the wash sale rule eliminated by default or do you still have to apply for MTM for that llc.
It’s eliminated but u need 25k+ to keep the lvl running
Ross is outstanding.
If you are day trading with money in a Roth IRA, and don't physically remove the gains from the Roth, does this reduce the taxes you pay on a short term taxable gain ? (since it's in the Roth)
Can I write off all my trading equipment purchased to start my day trading business without having an LLC or is an LLC required?
We are unable to provide any personal tax-related advice and cannot recommend a specific CPA. Tax questions will depend on your individual circumstances. I recommend reaching out to a local CPA in your area to get more information. All CPAs should be knowledgeable about trading transactions, but be sure to confirm if they have dealt with these kinds of situations before.
For our Warrior Pro members, chapter 18 of Day Trading: Strategies & Scaling (formerly the Small Cap Day Trading Course) (Part 2) is focused on taxes for day traders. We also have a few links on our website with some helpful articles we wrote about trading and taxes:
www.warriortrading.com/day-trading-taxes/
www.warriortrading.com/maximize-tax-returns/
www.warriortrading.com/mark-to-market-definition-day-trading-terminology/
Taxes for Day Traders Video: ua-cam.com/video/WJHgMDyNXKo/v-deo.html