I am a day trader and I am trying to file my taxes to claim the active trader espenses like margin interest, home office, & purchase of computer. need help

[ColeenD3]

 Please see this answer from @AnnetteB6. 

In order to claim home office expenses as a trader, you will need to be using a CD/downloaded version of TurboTax because there is an entry that will be required to be entered directly on a worksheet in Forms Mode.

If you have not elected and submitted the Mark-to-Market (MTM) accounting method, then go to Forms Mode to view your Schedule D.  Line 16 of Schedule D will show the overall gain or loss being reported on your return.  If you did not report any transactions during the year as an ‘investor’ and Schedule D shows only your gains/losses from being a ‘trader’, then line 16 is the amount you use in the home office instruction below.  Otherwise, you must do some math outside of your return to determine only the overall gain/loss from transactions associated with your business as a ‘trader’.  Transactions as an investor (for example, selling a long-term holding) cannot be considered to be income associated with your business as a trader.

If you have elected and submitted the MTM accounting method, then go to Forms Mode to view your Form 4797.  If you have no other items reported on Form 4797 except for your trader activity, then the ‘trader’ gain is the amount from line 18b.  Otherwise, you will need to calculate the total gain for your trader activity only to use in the home office instruction below.

All  business expenses will contribute to Schedule C showing an overall loss since the income from trading is not reported directly on Schedule C.  With an overall loss on Schedule C, no self-employment tax will be imposed.

[olio1987]

Thanks @ColeenD3 !!  this link has a little bit more detail from expert AnnetteB6: 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/as-a-stock-trader-with-home-offi...

Basically what I did: (I'm not a tax expert, CPA nor a financial advisor - I just followed instructions)

1) You need the CD/downloadable software that is for "home & business".... there's no other way to do this online... 

2)  If you qualify for TTS, you have capital gains, but you didn't select MTM for 2021? no worries, import your 1099B, it'll be added to your schedule D. NOTE: there's a 3K transaction limit on turbo tax, if you exceed this then select "I'll enter a summary for each sales category". Add total proceeds, cost basis, and your wash sales (adjustment code W) to show your capital gains.

3) Go to your business section and add all your expenses. Do not add any sort of income since your income is already on your schedule D 

4) You'll get stuck under your home office expenses where it tells you that the simplified method of deduction of $5 per sq. ft. isn't allowed because you don't have income listed. and if you add income your taxes owed sky rockets cause it's double taxing you.

5) To fix this, open up forms > click on form 8829 > scroll down to the box titled "line 8 calculation smart worksheet" - and on line C2 "adjustment to calculated gain": type in your short term capital gain. You can find this on your from your schedule D form line 7. If you have long term & short term, then calculate out the long term gains and only add the short term since long terms don't make you a TTS trader.

6) Hit enter and go back to "step by step" > your business > you will see that now you can deduct your home office expenses using the simplified deduction method of $5 per sq. ft. 

I hope this helps. It took me days of research and reading through forums to find this answer - I hope Turbo tax can make this EASIER going forward for those TTS not on MTM with capital gains.  

[spencer00]

Great! Make sense . Thx

[madison1137]

I'm facing the same issue this year, and I've tried all day long to get answers from TurboTax - and nobody is able to assist me - and they don't seem to transfer me to an accountant as they had done in past years.   ..... So, in your post, you state people simply add the net gain (that's currently listed on Schedule D) into form 8829, line 8C2.  But if I do that, won't TurboTax be seeing my gain reported - twice - in the return? 

[AnnetteB6]

No, for a couple of reasons.

Form 8829 is the form used to claim home office expenses.  It is associated with Schedule C and normally uses Schedule C income to justify that you can claim home office expenses.  

Work as an active trader does not report any income on Schedule C, so Form 8829 cannot use that income to justify the home office deduction.  Entering the net gain from trading on Form 8829 line 8C2 is only used to show that there is income from the use of the home office so the deduction is allowed.  

It is not being added to your income a second time.  It is simply moving a number from one form to another to justify the home office expense.  

@madison1137 

[madison1137]

Hello. Thank you for your reply.  But just to clarify -- you state that you're "moving a number from one form to another to justify the home office expense"  But adding the number to form 8829 is "adding" - not "moving" the gains number. It will still be on Schedule D too. .....

Also, have you done this in previous years and the IRS accepted this?

I really appreciate your responses, by the way. I've been tearing my hair out trying to figure out how to do this and TurboTax customer service has been really unresponsive.

[DMarkM1]

As @AnnetteB6 states, "Entering the net gain from trading on Form 8829 line 8C2 is only used to show that there is income from the use of the home office so (that) the deduction is allowed."   It is not counting/taxing the income twice.  

@madison1137 

[Doony]

I currently list my profession as an investor. Gains and losses on Schedule D. This is my primary income. I have not written off expenses on Schedule C because I fear (a) it looks weird (b) I will incur social security tax. You think it is OK to list gains on Schedule D and write off business expenses on Schedule C? Please note I take standard deduction.

[AnnetteB6]

Yes, it is OK to list gains on Schedule D and write off business expenses (including home office) on Schedule C.  There is no other way to claim those expenses.  

There will be no true income reported on the Schedule C, only expenses/deductions.  Therefore, there is no self-employment tax involved.  Your income reported on Schedule D will be entered into TurboTax in the Schedule C section only to allow the home office expenses to be claimed.  The income is not reported on Schedule D and Schedule C.  This is a special situation, otherwise the expenses from your home office will not be allowed.

Take a look at the following TurboTax help article for more details and step-by-step help to report this situation in your return:

How do I report my trader activity with or without Section 475(f) election in TurboTax?

@Doony 
 

[v1seibels]

i am considering using downloadable software for 2022 and selecting  Schedule C and entering my Daytrading as a business.  .  I did not select the Mark to Market election in 2021 .So my question is do i still  use form 4797 . I see where  you responded  that entering manuall on scedule C is what is best for my desired outcome .   

The last time i chose to download TruboTax and paid for it , the software would  not upload my information from TD Ameritrade  I was told there was a glitch and a problem with the system and I would be  refunded  . The refund did not occur and i called and received little support and was told there was not a problem with software .. I did not receive a refund of 125 is what i recall 

[madison1137]

First, you have to use the CD-version of the TurboTax software to be able to manually enter the data on Schedule C. For some strange reason, the downloadable version doesn't have this option - or at least it didn't in 2023. (Not sure if they'll fix that in the 2024 version)

As for TD Ameritrade -- I had accounts at both Schwab and TD Ameritrade and had no trouble transferring the data into the CD version of TurboTax last year. ...  Of course, this year, all of my TD accounts have moved to Schwab under the merger, so I'll no longer need to transfer from TD.

So, I highly suggest you purchase the CD version of TurboTax. It's harder to find the CD version (everyone seems to sell the downloadable version instead). But the CD version offers a lot more features -- especially for those doing day trading. (I didn't choose mark to market either).

[v1seibels]

Thank you so very much . I will look for the CD version and attempt  myself.. Did you manually enter your every transaction on Schedule C... i am asking if this is requred , ?

Thank you Virginia 

[madison1137]

No, you don't need to manually enter everything on Sked C  -- just the part related to day trading.

With the CD version, you can flip to the actual Sked C page and Form 8829 line 8 worksheet C2 "Adjustments to calculated gains" worksheet page -- and input the data on that line. (The download version doesn't give you the option of flipping to the form & inputting the data manually onto the worksheet page).   Everything else on Sked C is done automatically as you use the TurboTax software.

[v1seibels]

I cannot find the cd 2022, Premier anywhere except ebay for 90.00 nt delivered until Aug 27 but i guess i have to do that 

[DoninGA]

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@v1seibels wrote:

I cannot find the cd 2022, Premier anywhere except ebay for 90.00 nt delivered until Aug 27 but i guess i have to do that 

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To complete and file a 2022 tax return using TurboTax you would need to purchase, download and install on a personal computer one of the 2022 desktop editions from this website - https://turbotax.intuit.com/personal-taxes/past-years-products/

A 2022 tax return can only be printed and mailed, it cannot be e-filed using TurboTax.