Trading Business Expenses

You can use the more favorable business expense treatment if you qualify for trader tax status.

Traders eligible for trader tax status (TTS) can deduct all reasonable business expenses.

Business deductions include:

  • Tangible personal property like a computer, up to $2,500 per item, providing the taxpayer files a Sec. 1.263(a)-1(f)) safe harbor election with the tax return.
  • Section 179 (100%), 100% bonus, or regular depreciation on computers, equipment, furniture, and fixtures (over $2,500 per item).
  • Amortization of startup costs (Section 195), organization costs (Section 248), and software.
  • Education expenses paid and courses taken after the commencement of the trading business activity. 
  • Section 195 startup costs may include education expenses within six months of beginning TTS.
  • Books/publications, market data, charting services, online and professional services, cloud services, chat rooms, mentors, coaches, supplies, phone, Internet, travel, meals, seminars, conferences, assistants, consultants, office rent, and more.
  • Home office expenses for the business use portion of a trader’s home (share of rent, mortgage interest, real estate tax, depreciation on home, utilities, repairs, insurance, and all other home costs).
  • Margin interest expenses (not limited to investment income).
  • Interest expense on trading capital
  • Stock-borrow fees and other costs for short sellers. 
  • Self-created software for automated trading systems.

Business deductions don’t include the following:

  • Vehicles 
  • Commissions
  • Employee-benefit plan deductions (TTS S-Corps can arrange health insurance and retirement plan contributions in connection with officer compensation)

For more information, see Green’s Trader Tax Guide Chapter 5 on Trading Business Expenses.