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