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Please consider the following information before answering:

  • I have a full time job where I earn more than $90,000 per year
  • I have been trading options for the last 2 years and have made between $10K-20K annually.
  • I report my income from option trading as "income" and not "capital gains"
  • Would it make more sense to incorporate and trade options as a business ?

If I were to incorporate:

  • How much tax would I have to pay for income from options trading ?
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  • I report my income from option trading as "income" and not "capital gains" Canada must be different, since in the US, you'd claim that as capital gains.
    – RonJohn
    Commented Mar 18, 2018 at 18:35
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    Please refer this link: theglobeandmail.com/globe-investor/personal-finance/taxes/…
    – Wolfpack
    Commented Mar 18, 2018 at 19:44
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    It is not as straight forward as you say it is
    – Wolfpack
    Commented Mar 18, 2018 at 19:45
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    Aha ! Got it ! I will disregard any advice you provide going forward! FYI ... an accountant does file my returns. My question here was about whether to incorporate or trade options as an individual... Please pay attention
    – Wolfpack
    Commented Mar 18, 2018 at 19:59
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    @RonJohn Please don't ascribe US tax rules to Canada. In Canada, this is very likely to be considered 'on account of income' rather than 'on account of capital gains'.
    – Grade 'Eh' Bacon
    Commented Mar 19, 2018 at 16:55

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You should consider consulting a qualified tax expert with relevant experience (i.e. for corporations involved in investing/trading.)

FWIW, it's quite possible that conducting your trading inside of a corporation might not save you any tax at all. Have a look at this article: The Blunt Bean Counter: Should your Investment Income be Earned in a Corporation. One key point from that article:

In order to ensure taxpayers do not defer income tax on investment income by using a corporation, the Income Tax Act imposes an income tax rate that is essentially the same as the highest marginal personal income tax rate.

Many small businesses in Canada can take advantage of reduced corporate income tax rates through the Small Business Deduction. However, the Small Business Deduction requires the corporation to have active business income. Income from specified investment businesses only qualifies as active business income in certain cases. A qualified tax expert will know best.

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  • This is a good answer; perhaps something is possible, but honestly in Canada it is very rare for this to lead to a net positive result [this is done on purpose]. @Wolfpack If you want to look further into this, search the general tax concept of "Additional Refundable Tax", which in Canada basically refers to tax that you pay as a corporation in certain situations, such as earning some types of investment income, which you get refunded back only when you pay yourself dividends, thereby making you pay the taxes personally anyway. For anyone <top income bracket, this usually accelerates tax.
    – Grade 'Eh' Bacon
    Commented Mar 19, 2018 at 16:58

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