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The stock market offers no guarantees. Seeking investment opportunities requires a basic understanding of stock tax laws. Participating in day trader activity, requires following Securities Exchange Commission laws and regulations. The laws exist to protect you as an investor. The first thing to keep in mind is you will be required to have a minimum $25,000 to investment in a margin account and a copy of the "New York Stock Exchange" day trader information memo. A margin account is an account that contains collateral that will be used against any of your speculative trading activity.
1. Your Trading Style
Define the style you wish to adopt when trading stocks. There are a few different trading styles to adopt. If, for example, you plan to trade the same stock daily, or several times per week, you are considered a pattern trader. Pattern traders are subject to a set of special SEC rules that govern trading activity.
2. Ability to Lose
The ability to lose will also define your style. If you do not feel comfortable losing money, when working with a margin, consider changing your investment style to long-term or swing style trading.
3. Follow the Rules
Make sure you follow all basic stock trading regulations and stay in compliance with the SEC. Violations of the rules will result in loss of privileges prohibiting your ability to trade. Some violations will also include fines.
4. Two-Day Wait
SEC rules require all pattern traders allow a minimum of two days before withdrawal of funds. The two day rule is implemented to cover any trades. Keep in mind that all withdrawals must allow a minimum of $25,000 to remain in the account.
5. Taxing Situations
Traders, even people conducting limited activity, are considered by the IRS as “investors.” However, if your activity has you spending each day engaged selling and buying stocks, then the IRS will consider this your “profession” and all expenses you incur making daily trades will be tax deductible. Otherwise, as an investor, all expenses are just part of your hobby. Qualifying as a “trader” allows you to deduct the expenses such as your home office, certain communication and transportation expenses directly related to trading activity, investment guides such as newsletters, magazines and other written aids along with your personal computer equipment including investment software.
6. Tax Laws
The IRS tax laws allow you to deduct all your investing expenses on Schedule C just like any other self-employed individual. Additionally, all Schedule C deductions reduce your household adjusted gross income as well which can possibly allow for deducting personal exemptions as well to take greater advantage of the tax laws. And, as of 2008, you can deduct any interest charged on a margin account up to $250,000.
1. Your Trading Style
Define the style you wish to adopt when trading stocks. There are a few different trading styles to adopt. If, for example, you plan to trade the same stock daily, or several times per week, you are considered a pattern trader. Pattern traders are subject to a set of special SEC rules that govern trading activity.
2. Ability to Lose
The ability to lose will also define your style. If you do not feel comfortable losing money, when working with a margin, consider changing your investment style to long-term or swing style trading.
3. Follow the Rules
Make sure you follow all basic stock trading regulations and stay in compliance with the SEC. Violations of the rules will result in loss of privileges prohibiting your ability to trade. Some violations will also include fines.
4. Two-Day Wait
SEC rules require all pattern traders allow a minimum of two days before withdrawal of funds. The two day rule is implemented to cover any trades. Keep in mind that all withdrawals must allow a minimum of $25,000 to remain in the account.
5. Taxing Situations
Traders, even people conducting limited activity, are considered by the IRS as “investors.” However, if your activity has you spending each day engaged selling and buying stocks, then the IRS will consider this your “profession” and all expenses you incur making daily trades will be tax deductible. Otherwise, as an investor, all expenses are just part of your hobby. Qualifying as a “trader” allows you to deduct the expenses such as your home office, certain communication and transportation expenses directly related to trading activity, investment guides such as newsletters, magazines and other written aids along with your personal computer equipment including investment software.
6. Tax Laws
The IRS tax laws allow you to deduct all your investing expenses on Schedule C just like any other self-employed individual. Additionally, all Schedule C deductions reduce your household adjusted gross income as well which can possibly allow for deducting personal exemptions as well to take greater advantage of the tax laws. And, as of 2008, you can deduct any interest charged on a margin account up to $250,000.
