When trading the Forex market, there is a lot to consider but one important area of consideration is your trading and investing policies on how are futures and options taxed? With the IRS recently having to come out with a clarification of how trading and investing will be taxed, it is important to review your own policies. Will you be taxed with the regular income tax or will you be taxed with a stamp duty which is levied under the Trading and Investing Income Act. Some people call this double taxation but it’s really not considered as such by most. If you know you are trading on an account that is affected by trading policies like these then you have double security.
When setting up a futures trading account, you need to make sure you understand the account and trading policies associated with your particular trading account. Many brokers will allow you to open an account and start trading using a standard brokerage account, this is usually done for free, usually through an internet trading company. The account holder is however required to maintain funds in the account which means he or she will have to pay taxes on those funds. How are these taxes calculated? The amount of tax you’re required to pay will depend on the place where you’re trading. If trading is made from your own private account then the tax rate is lower than when trading in a registered account.
You can save money by knowing your trading policy in advance. When trading in the Forex market it is essential that you are aware of any trading restrictions you may have. These include instances where you are required to pay taxes before making a trade and restrictions relating to the maximum amount of money you can trade in a month. Many brokers have a minimum daily limit, this amount is usually fixed and cannot be changed without the broker’s permission.
With both accounts there are also circumstances where you can receive a refund of tax payments. If you lose money on a trade and it was due to a penalty the amount will be refunded to you. If the trade resulted in an actual profit for you then you may be eligible to receive dividends. Again if you were able to keep your original trading account open then you may be eligible to claim back some tax payments.
Another way to look at the question of how are futures and options taxed? Utilizing the tax laws from your country of residence will help clarify the issue. Most countries have some type of tax system based on income that passes through a country’s tax system. Most brokers will advise you to keep your trading accounts and dealings in your country of residence and not conduct trading in the United States or Canada while you are resident there.
Futures and options that are conducted between resident Canadian citizens are considered to be taxable in Canada. This means that taxes will be applied to the profits from such transactions. While there are no capital gains tax or inheritance tax applicable to such transactions, these taxes can apply in the future. If you do happen to sell your option in the future and gain funds it will be taxable, even though the option was not purchased or held by you during the current year. Such transactions are subject to the usual sales tax laws of your residence.
Options contracts between traders are traded on futures exchanges. Your options trading account is separate from your trading account for the purposes of trading options and Futures trading. Your trading account is used to buy and sell options and Futures trading. When you enter into a new trading account the money for your initial margin deposit will be applied to your trading accounts.
You should always consult a financial professional with specific advice on your individual tax situation. The information contained in this article is designed for general educational purposes only. It should not be used as, in place of or in conjunction with professional financial advice relating to trading Futures Options Trading. For additional information regarding tax laws and regulations relating to trading Futures Options Trading, please consult a tax professional.