A few comments in addition to @Mike9241 in-depth reply:
- Be prepared to support your position as a day trader. These type of returns have a tendency to be more scrutinized by the IRS. The key here is maintaining excellent records to support your position that you are in fact qualified to take this position on your tax return.
- As pointed out by Mike, day trading means you are in and out of the market on a short-term basis; not a long-term investor. This means gains are short term and you don't get the advantage of long-term capital gains rate.
- Additionally, since all the trading activity is reported on Schedule D, if your losses exceed your gains, you are treated as any other individual; meaning you can only take excess losses (loses that exceed your gains) up to the $3,000 limit.
- I recommend that you invest some time with a tax professional that can help you navigate the pros and cons of being a day trader with and without the MTM election. Based on your questions, I believe this would be $$ well spent.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
