Forex and Tax Question

About a year ago I invested $1,000 into my live forex account. My account is now $2,500. My question is how is forex income taxed? Is it taxed regardless if I cash out? Because it’s not really income I have access to right away if it’s in the forex live account. I just want to leave it un touched to increase it year by year.

depending on your country of residence and local tax laws. for myself, i live in singapore and capital gains are not taxable as long as it is not your primary source of income

I am new to Forex but in the stock world you pay taxes on your realized gains so it would likely be the same for forex.

Its a bit grey in the uk.
In theory you should pay capital gains tax, but hmrc will not let you offset losses so, I understand, some traders have successfully argued that they therefore have no right to claim CGT.
If anyone has done this themselves perhaps they could post

stocks are different cause u are buying or selling an asset class. currencies are mere transection capital gains

Most likely it’s taxed, but it’ll depend on your country and tax laws. I’d check with a tax accountant.

Just make sure the accountant specializes in this, sometimes they are not familiar with forex trading.

You can check these guys out. It helped me. Look into their blog also. Hope it helps. Turk
Forex | GreenTraderTax

You are correct. My accountant in Australia didn’t know how to deal with FX profits and I called the Taxation Department and they were very vague as well.

Depends on which country you are in. Currency trading is treated differently to CFDs.

Here in France the official line is around 60% on profitable trades, no charge or allowance on losing trades. Note that this is by individual trade not net profit across all trades.

So you make a trade and lose 100 Euro, no tax. You make 100 Euro profit on the second trade which attracts 60 Euro tax. That puts you 60 down on the day. That is why I don’t have an account here in France.

If your local tax office is vague or appears not to know then its up to you to find out. Its surprising just how knowledgeable they can get in a short time if they find you are making a reasonable amount.

I live in Australia and Capital gain tax rate applies to Forex trading. If you are a long term trader and you hold the position for more than 12 month then you can apply for the 50% discount on income tax, otherwise you pay the corresponding rate for the 100% income earned during the year… I consider forex as part of my earnings and pay my taxes as it was my wage… peace of mind as I don’t want trouble with the tax office…

Congratulations to everybody for kicking some Forex ass!! In my country of New Zealand there is no cap gain tax on income, what happens is you pay tax on the money you drawer down for income. so if you made $100,000 income in 12 mths but you only used $50k to live on, then you only pay the tax on that $50k.
Good luck to everyone and i am glad to be walking the Forex earth with you all!!

As many members have already stated, it depends greatly in your country.
For some the yearly profit from your trading should be added to your ordinary income and taxed accordingly. For some it fits into a investment category, or have some possible opt-ins like the 60/40 in the US. and in other places they just dont know what to do with it.
I am from Mexico and i have been able to consult top Tax consultants (people from big consulting companies) and none had a straight answer as how it should be done, they had some vague options to it, so not really helpful. I did my own research and worked with a tax consultant, even called the SAT (the organism in charge of collecting taxes in Mexico) and they told me that they had to do a “formal study” on the case in order to give me a proper answer (that would take anything from 2 weeks to few months).
Anyway, in summary, it depends even on your personal tax situation in your country.
In mexico for example, you should pay tax on a mix of things if you do forex trading. You should add your profits for the year (closed trades only, wins minus losses) to your ordinary income. Then since its in an overseas account you have to calculate your exchange rate profit or loss for the total balance of the account and add those profits to. In some cases you end up paying double tax in some parts.
There are other alternatives but not even judges have been able to clarify this. There has been more than 4 cases about tax evasion for forex traders, and all judges determined different ways in which this should be declared for tax purposes. If you are from a country in which forex is not well regulated or has no clear tax rules, you could be able to declare your forex taxes in other country (with proper regulation) if your home country has a treaty for it (generally this treaties for preventing double tax will be general enough to be able to declare forex taxes in other country, given that your broker is based in that country).

Good luck.

If you are in the US. quite simply (options, futures and Forex) all fall into the Section 1256 which means adding a 6781 form. Instead of asking for cost/sale qty and symbol, the bottom line is Total purchase , total sales, did you gain did you lose on both , either way 60% is taxed as long term capital gains and 40% is short term gains. The only difference is I believe it will go after the 6781 to other income line on the 1040. Note: what is an added plus for new traders is the lack of a cap of limiting your losses to $3000. Different tax category though if you decide (and I am unsure how) if the gain is the underlying currency which you take out of your account , ie: US based and get AUD .