Is income from currency trading taxable
But just to be sure before filing my taxes soon, I've decided to double check the facts from Canada Revenue Agency. As you know, the difference between income tax and capital gain tax is substantial. Income tax is taxed at your marginal tax rate.
Whereas capital gain tax is a generous half of your marginal tax rate. Taxes in Canada is generally simple to do. The problem though, is sifting through the cacophony of information within the Canada Revenue Agency to find out the applicable rules. Basically, forex trading can be treated as either income or capital gain tax in Canada surprise. According to ITR Foreign exchange gains and losses.
As you can see, it is very vague. That's why forex trading can be considered income or capital gain tax. It is up to you and your accountant to figure out which works for you.
A noteworthy point in the above excerpt is that the holding period is not taken into account. So there's no day rule like in the states whereby frequent trading would miss out the capital loss credit if they re-purchase the same asset within day of disposal.
Looks like I have misconstrued the above article with regard to capital loss. In which if you repurchase your property e. In the United States there are a few options for Forex Trader. First of all, the explosion of the retail forex market has caused the IRS to fall behind the curve in many ways, so the current rules that are in place concerning forex tax reporting could change any time.
Regulations are continually being instituted in the forex market, so always make sure you confer with a tax professional before taking any steps in filing your taxes. There are essentially two sections defined by the IRS that apply to forex traders - section and section This is the most common way that forex traders file forex profits.
Profitable traders prefer to report forex trading profits under section because it offers a greater tax break than section Losing trader tend to prefer section because there is no capital-loss limitation, which allows for full standard loss treatment against any income.
This will help a trader take full advantage of trading losses in order to decrease taxable income. In order to take advantage of section , a trader must opt-out of section , but currently the IRS does not require a trader to file anything to report that he is opting out. This number should be used to file taxes under either section or section Forex trading tax laws in the U. Currently, spread betting profits are not taxed in the U. This means a trader can trade the forex market and be free from paying taxes; thus, forex trading is tax-free!