So here is my question. When getting taxed on trades such as short term ones as a day trader, is it a end of the year thing? Quick scenario, say I had opened a 25k account to day trade with but at the end of the year only made 3k, thus putting me at 28k, but in reality I had won 30k day trading but also lost 30k and ended up with only 3k more then when I opened my account with 25k. Would i be taxed on the 30k I won?? Plus the 3k? Or just the 3k? I'm really confused, because if you're taxed on 33k then technically you would most likely put yourself in the negative and owe lots of money in taxes...is this correct? Thanks for any help.
2 Answers
If you have made $33k from winning trades and lost $30k from loosing trades your net gain for the year would be $3k, so obviously you would pay taxes only on the net $3k gains.
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Really? Geez I had no clue it worked that way, I figured you're taxed on every gain not only the net change. Thanks Victor.– RowneMay 5, 2017 at 7:13
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By the way the net gains means that any expenses like brokerage are deducted from your total profits. So if your brokerage is $5 in and $5 out and you made 50 round trades during the year, you should deduct $10 x 50 = $500 from your $3000 profits to get to your net profit of $2500.– VictorMay 5, 2017 at 7:26
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Thank you again Victor your knowledge is priceless to me, Thank you sir.– RowneMay 5, 2017 at 7:30
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@Victor You might cut out the word "obviously" since obviously it's not obvious. May 5, 2017 at 13:09
As Victor says, you pay tax on net profit.
If this is a significant source of income for you, you should file quarterly estimated tax payments or you're going to get hit with a penalty at the end of the year.
