Trader Tax Status
Trader tax status constitutes business treatment and it unlocks an assortment of meaningful tax benefits for active traders who qualify.
GreenTraderTax coined the term “trader tax status” (TTS) in the late 1990′s, and we’ve focused on trader tax benefits ever since. By default, the IRS considers traders to have “investor tax status” with restricted Section 212 investment expense treatment, capital loss and wash sale loss limitations, and no opportunity for employee benefit plan deductions.
TTS is the linchpin for using Section 162 business expense treatment, making a timely Section 475 election for exemption from capital loss limitations and wash sale loss adjustments and unlocking employee benefit plan deductions including health insurance and retirement with an S-Corp.
The IRS recognizes TTS, but it does not provide a bright line test for qualification. That’s where we come in with “Green’s Golden Rules For TTS Qualification” based on our extensive analysis of trader tax court cases and dozens of years of experience preparing tax returns for traders around the country.
Go to “Explore Trader Tax Status” on the upper-right of a computer, or below on a mobile device to learn more about business expenses, how to qualify for TTS, the Section 475 election and benefits, and employee benefit plan deductions.
For more in-depth information on the tax benefits of TTS, read Green’s 2017 Trader Tax Guide. Chapter 1 is on TTS, and it includes Green’s Golden Rules and many examples of traders who do and do not qualify for it.