My forex loss is considered as Capital Loss or Ordinary Loss? And Where/How to claim the loss?

[Kiki]

I am just a casual Forex spot trader, actually traded only a couple of times in 2022. And I lost $2000.

I am not a day trader either trading in business. 

Q1) .  Do I claim my loss as Capital Loss or Ordinary Loss?  

          ( I am assuming my loss is Capital Loss Schedule D ??? )

Q2).  If it's Capital Loss   ->      Investment and Saving ( 1099DIV, 1099INT, 1099B . . .)  is right Section to claim ?

          If it's Ordinary Loss  ->    Other income   1099MISC is right Section to claim?

I spent a lot of time to search  to determine whether Capital or Ordinary Loss, but each writer describes a little differently and I want to make sure it from knowledgeable people here. Also, if anyone gives me a guidance how to claim it in a right section, it would be very helpful.

Thank you so much.

[fanfare · Accepted solution]

Currency gain/loss is ordinary income

UNLESS
you  sign and date a written election to have currency transactions processed under Section 1256 40%/60% capital gains

before your first trade of the year and keep that with your tax documents.

@Kiki 

[boblaa]

 

Taxes for Over-the-Counter (OTC) Forex Traders

Most spot traders are taxed according to IRC Section 988 contracts, which are for foreign exchange transactions settled within two days, making them open to treatment as ordinary losses and gains. If you trade spot forex, you will likely be grouped in this category as a "988 trader."

 If you experience net losses through your year-end trading, being categorized as a "988 trader" is a substantial benefit. As in the 1256 contract category, you can count all of your losses as "ordinary losses," not just the first $3,000.

 

How FOREX Trades Are Taxed - Investopedia

[Kiki]

fanfare, 

Thank you very much for your time and help.

[Kiki]

boblaa,

Thank you for your help and time.   I will claim my loss as ordinary loss.