I have heard a lot of people saying that they set up a Forex business so that they can write off all their expenses like a new computer, internet charges, a portion of their utilities, books on the subject, etc.
Is this a wise thing to do if you plan on investing in Forex or the stock market for a long time and anticipate profits? Here are the reasons I can think of “for” and “against”
Pros:
-Business write-offs for many expenses that individuals cannot claim.
Cons:
Legal fees of setting up a corporation. Separate corporate tax return. (You could get around both by making it a sole proprietorship instead, and put it on your own taxes.)
Capital gains: I don’t know if it’s similar in the US, but here in Canada 50% of your capital gains are tax-free automatically. I don’t know if that would outweigh being able to write off business expenses or not.
Anyone who has traded as a formal business have any input?
So are you recommending trading as an individual or as a business? You are going to need an accountant either way if you can’t prepare your own taxes.
Or if you’re suggesting I should see a CPA to find out, I was just hoping someone here has already gone through the process and could give some free advice instead
Trading is not like other businesses where you have large overhead to write off. What is there to write off? If you file as a biz you are just going to pay more to the man.
Just show it as income or capital gains for yourself. Which is which and what is what is where the cpa comes in.
If you are going to be a business of one that a LLC would be best. depending on your state (not all states recognize LLC’s) this will allow you to be able to write off certain expenses. but you will fall under a different tax category so you have to file taxes as a business rather than as personal income or capital growth.
oh and to write off expenses such as a computer or part of your home you have to have your “office” separate from your other parts of your home. if you trade from your computer in your living room you cannot write this expenses off. the space must be separate from your personal living space.
to figure out what you may deduct check out Publication 587 [U]IRS [/U]this will generally tell you what you need to know about business expenses.
I would recommend talking to a SCORE rep they give free advice on a business.
now as a business i don’t know if you are planning to have more traders under your belt as a business but if so i would recommend a business rather than run solo.
but if you are trading individually I would myself prefer to trade and put the profits as income or capital gains.
