Currency Trading Taxes
I heard that day trading currencies has more tax benefits than day trading stocks. Is this true?
This is true when it comes to residents or citizens of the United States (please ignore this information if you are a foreigner - foreigners pay no taxes when trading currencies; period!).
Currency day traders have a tax advantage over stock traders. Sixty percent (60%) of the capital gains from trading currencies are taxed at the lower long-term capital gains tax and only 40% of the profits is taxed at the higher short-term rate. On the other hand, all of a stock day trader's profits are considered short-term and are taxed at the higher short-term rates. In other words, stock traders do not enjoy the favorable 60/40 split that currency traders have when it comes to taxes.
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