Prop firm trading expenses

[Ray1]

I'm a non-professional investor. I'm trading with an American prop-firm that will send the profit shares in USD. The prop firm charges some fees and provide capital for trading under their account which makes me an independent/individual contractor with them. I will receive a 1099 form from them. Can I deduct my costs associated with these activities, eg. the monthly fees the prop firm charges or computer/vps costs?

[Mike9241]

see this webpage. really don't know if your trading fits this scenario. if it does your income and expenses would be reported on schedule C.

https://mytraderlife.com/2021/11/02/prop-firm-trading-taxes/#:~:text=Since%20you%20are%20trading%20o... 

[Ray1]

Thanks @Mike9241 !

I think it answers the question, and its pretty much what I thought.

That said, I have another question too, would I be able to write expenses that relate to this years profit but were occurred last year? I'm referring to the fees I have paid for the account last year (2021) while I didn't receive my payout until this year (2022).

[Mike9241]

if the fees were deducted from the 2022 payout that's the year for the deduction. 

[Ray1]

Just to clarify, the prop firm charges the trader ahead of time and the fees are not deducted from the payout, they are out of pocket, will those costs still qualify for next year tax deductions?

[Conceptz-x]

Anybody?  The link in response to the initial post isn't clear on the Evaluation and Paid Account fees.   I'm curious as to this as well.  I paid a fairly significant amount to qualify for paid accounts to the prop firm I'm with now, I'm not collecting profits from the firm.  This firm issues a 1099 at the end of the year.

[DianeW777]

You are allowed to deduct ordinary and necessary expenses that would be expected in this line of work and which allowed you to produce income and/or a profit.

• For business expenses to be deductible, they need to be both “ordinary” and “necessary.” The IRS considers an expense to be ordinary if it is common and accepted in your industry. For an expense to be considered necessary for your business, it must be one that is helpful and appropriate for your trade or business.
  • What is a business (Schedule C)?
• @Conceptz-x