Are you a trader who deals in forex? Are you wondering what the tax implications are for your trading? You’ve come to the right place! Here, we’re going to cover everything you need to know about taxation for forex traders. This includes how much your profits are taxed, what type of tax forms you’ll need, and how to report your profits on them.
If you have any questions or comments, feel free to leave them below!
How much is trading taxed?
In the US, forex trading is taxed differently from other types of income. Forex traders in the US are categorized as “self-employed” and taxed accordingly. You will need to pay a self-employment tax of 15.3% on your net income. That means that if you make $100,000 a year, you’ll owe about $16,650 in taxes!
What types of tax forms do I need?
Forex traders are taxed in much the same way as other business owners. This includes self-employed individuals, who are taxed via the Self-employment Tax. This tax requires that traders file a Schedule SE with their 1040 return to claim this deduction, which is then taken out of their Social Security earnings.
This does not mean you’re required to have your own company to be liable for self-employment taxes. If you have income from self-employment, no matter how small or large it is, you will be required to file a Schedule SE with your 1040 return.
How to report my profits on the tax form.
If you’ve made a profit with your forex trading, then you have to report it. You can do this on Schedule D of your 1040 tax form. This section is for your capital gains and losses, so just put the amount of money that you made in the fields.
This is also where you’ll use Form 8949 and put the U and V codes next to each sale or purchase that you make. This will help to show how much of a gain or loss you’ve had during the year.
After filling out Schedule D, move on to line 43 and enter the amount from line 10 (the total before subtracting any losses) as your taxable income. If you have already subtracted all of your losses, then enter -0-. Finally, if necessary, use lines 46-47 to calculate how much tax will be owed on this amount and enter that amount as well.