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

[spencer00]

yes. this is good one. i have this one studied several times. per this one, dividends and interest should enter sch B ( personal income) instead of Sch C .

[billyriggs]

I'm in a similar pickle. All of my income from trading has already been reported in other places: importing forms from TDA Ameritrade and listing my profits under "Cryptocurrencies."  Now, I show zero income on Schedule C, but $10,000 in expenses. I can't use all of my home office expenses because that schedule C shows zero income. I made about $50K trading, but spent $10K and want to report it all as expenses. How can I move my income/profits to schedule C?

[john9yao]

You don't need to move income to sched C.  All you need to do for home office expense is to input details instead of using the default/simple calculation

[billyriggs]

Sorry for my slowness, but I'm not sure what that means.  Just list all of my trading expenses, including home office, on schedule C showing a 100% loss? With no income?  And the income gets listed on Schedule D? Thanks for your help.

[tagteam]

@billyriggs A link to a relevant article has already been posted in this thread (reproduced below). Scroll down to the bottom to Exhibit 1.

Sec. 475 Mark-to-Market Election (thetaxadviser.com)

[john9yao]

Correct - no income on Schedule C, only expenses.  Gain on Schedule D.

[patou]

Per the IRS link you provided, "Traders can choose to use the mark-to-market rules". Focusing on the words, "can choose", this seems to indicate that you can be a trader (assuming all other requirements are met), and NOT elect mark to market, and still claim expenses. Are you sure you *must* claim mark to market as you state?

[Mike9241]

it's optional for an active trader to make the mark-to-mark election - 475(f) election.  if a trader wants to make this election it must be done by the original due date of the return (either by filing the election with the return or attached to a timely filed extension)  for the year before the year the election is to become effective.  

Traders report their business expenses on Schedule C (Form 1040 or 1040-SR), Profit or Loss from Business (Sole Proprietorship). Commissions and other costs of acquiring or disposing of securities aren't deductible but must be used to figure gain or loss upon disposition of the securities. 

without the election, the wash sale rules apply and the gains /losses are reported on schedule D. with the election, the wash sale rules don't apply and the gains/losses are reported on form 4797 part II

[tagteam]

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@patou wrote:

Are you sure you *must* claim mark to market as you state?

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Read the material under "Traders" at the link below. There is no requirement to elect mark-to-market in order to deduct expenses. 

Topic No. 429 Traders in Securities (Information for Form 1040 or 1040-SR Filers) | Internal Revenue...

[clevo]

This is in reference to a profession trader and not relevant to a day trader sometime referred to as "Trader Tax Status". Therefore this response in not only inaccurate to question posed, but misleading to anyone reading @AmyC's reply.

[clevo]

@ColeenD3 

This statement is not accurate "If you did not make the Mark to Market Election, you are not a Day Trader."

You can be a day trader ie "trader tax status" and decide not to elect MTM. Not electing MTM does not preclude you from being a day trader ie having "trader tax status".

[Mike9241]

if you are an active trader your expenses go on Schedule C.  without the MTM election trades are reported as capital gains/losses and are subject to the wash sales rules.

[spencer00]

How about long term gain and short gain on schedule c ? No difference? 

[tagteam]

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@spencer00 wrote:

How about long term gain and short gain on schedule c ? No difference? 

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They are reported on Schedule D without the MTM election and on Form 4797 with the MTM election.

See https://www.irs.gov/taxtopics/tc429

[kiran]

Since Traders (as Sole Proprietors) don't incur Self-Employment tax on gains/losses, how do we remove the Self-Employment tax in Schedule C? Turbotax adds this automatically.

Note - reg showing income in Schedule C (say $20K in short-term trades), I've been adding a -$20K in Misc Income to offset the Schedule D cap gains and +$20K in Schedule C income.