This is one of the reasons I like trading an IRA. There are no tax issues like this, and taxes on profits are deferred into the distant future.
Some off topic questions, related to your comment: 1. How do you take money out from an IRA? 2. What are the limits on funding an IRA - how do you get it to the 25,000 PDT limit, to start with? Thanks
Question about IRA-if i'm unemployed trader,making 200-500K a year, i cannot deduct my contributions, right? but i can open an IRA account and put some money in it? looks like it's 5K for 2008-2009. now here is my question-i open an IRA account ,but put 50K in it, make another 50K in trading profits by end of the year, then withdraw 45K from initial 50K. so my contributions for year still 5K, but what about profits? is there any taxes on it? Thank you!
The profits are tax deferred in a trad'l IRA. I believe if its a ROTH IRA, you won't have to pay taxes on the profits since you contribute after tax dollars into it.
Thank you,i see... so it should work like in example here? http://www.retirement-income.net/ira-tax-brackets.htm but what about moving large amount of money into IRA during the year and then withdraw them? shouldn't be a problem? Thank you!
I would suggest you do some self-study on IRAs. This for example, is the IRS site on IRAs: http://www.irs.gov/retirement/article/0,,id=111413,00.html And you can also ask brokers that you use (stock, futures, etc.) about what is involved in trading an IRA - they can answer some questions to get you started.
Bob, Read the phase outs for Roth IRA's given your current income. Once you start making a higher income your ability to fund a ROTH IRA phases out. It's easy to find just google...
OP, I have sympathy for you. The situation is an unfair byproduct of a tax code that was not designed to take into account the reality of traders. There are a bunch of employees of dot com companies during the dot com boom-and-bust who went through similar situations because of the stock options they held