Obviously, some traders bend this rule based on their year-end outcome, and there seems little inclination on the part of the IRS to crack down, at least so far. Each way offers advantages and disadvantages, depending upon whether the FOREX account makes a profit or not. Because there are different types of FOREX trading, there are different ways for investors to claim gains or losses on their taxes.
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Futures and Cash Forex Forex is traded in two tradees Many FOREX accounts allow for both kinds of trades and investors may need to keep pdg track of which types of trades account for their profits and losses. For more information, visit TradersAccounting. With this option, investors can get the better capital-gains tax rate for 60 percent of the FOREX profits, with the other 40 percent treated as ordinary income. An experienced Traders Accounting tax professional can help you file in full compliance with IRS rules and make the most of your tax advantages.
Tax Strategies for Forex Traders
However, this tax treatment also limits the amount tgaders losses that a taxpayer can deduct. Tougher for Currency Traders Forex futures traders tend to breeze through tax time; their brokerage foeex sends them foeex IRS Formon which their aggregate profit or loss is listed on Line 9. The other type of trade is a commodity futures contract, where the investor can set a longer-time contract that can be months in the future. But things get a little more complicated tax-wise if you dabble in cash forex, which is subject to Section Treatment of Certain Foreign Currency Transactions. As a rule of thumb, if you have currency gains, you would benefit reduce your tax on gains by 12 percent by opting out of Section The Advantageous Split Forex traders receive a significant tax advantage over securities traders under Section The FOREX market is the largest financial market in the world and it offers many advantages to investors, including favorable taxes.