Here's a tax question that I can't find a good answer to on nearly any forum; Suppose you are a very successful day trader, making many, many trades per day, buying in and out of different stocks on a daily basis, often holding for a day or two or three before selling for a small profit many times a week. What are some things they can do to minimize the incredible short term cap gains taxes that accumulate? Is there some kind of business structure? Is there some kind of write off that can be used? I'm sure there are a number of things that can offset the tax liabilities, if anyone can add to the list I'd be very interested in the suggestions. Thanks in advance!
Taxes should depend on the return and scalability, because the return from investments from state/federal are much lower than average return of private. So if anyone makes huge returns and can also scale it up then taxes should not come every year but every 5 years for example. So there is more chance for the individual to let grow his income while the tax in the end can be much higher when there is a delay of the cut. In addition also the individual has much higher net worth in the end of a delayed tax cut by some years. So both sides would win here. It is just the law of compounding which would take effect here. Thinking longterm is better as conclusion.
Some light reading. I would suggest a consultation. As an alternative, I use a Roth IRA for the bulk of my investing and trading. No taxes. https://greentradertax.com/how-to-set-up-a-trading-business-for-optimal-tax-savings/
Move to Puerto Rico for 6 months a year. Zero taxes (Federal and Local) on capital gains. Google Puerto Rico Act 60
The very obvious one is offset your gains with your losses. Pretty straight forward. I would suggest to consult with and pay a qualified tax accountant. What you pay him, while, probably, a nice amount can be more than offset by any tax savings you incur as a result of his advice. Do some research and try to hire the best one. This is one area of trading where being a tight wad will cost you plenty and there are now 87,000 newly hired tax auditors of the IRS to go after their obvious targets, which are you and me. Not the filthy rich mind you who have lots of tax loopholes to begin with.
I was a day trader of stocks back in the later 90's. I all too well remember the steeper tax rates, and the hair pulling voluminous tax paperwork, Ughh! Key is to trade exclusively using instruments that fit the section 1256 rule. At least then there is the split between 60 % long term rates, even if held one second, and 40% for the rest of it. There are several indexes which qualify. Or you can do like I did 12 years ago and switch to futures, where all contracts are 1256 covered. And additionally, as Robert Morse said above, trade at least some out of a Roth IRA. That is now where I do ALL of my trading!
trade bigger pay the tax move on - throw away the rear view mirror. you can either conserve or you can produce - but it's impossible to do both free yourself from keeping what you have and go for broke to gain more than you need. after you have gone broke a few times it's not so bad when you look back on it - that is if you keep going.
"After a wild decade that included two divorces and three bankruptcies, in November 1940, Livermore fatally shot himself in the head at Manhattan’s luxurious Sherry-Netherland hotel."
https://www.forbes.com/advisor/inco... you make $500,000 a,marginal tax rate is 35%. You need to pick a state.