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Market Insights / Commentary

How the new tax law impacts traders

By Don Pratl

Do you trade for a living, or want to trade for a living? America’s new tax law makes some big changes everyone should know about.

Some professionals may “restructure their business for 2018 to take advantage of a major new section of the tax law,” accountant Robert A. Green said in our latest interview on TradeStation television. The key issue? Bigger incentives to opt for “trader tax status,” or TTS.

December’s overhaul of the Internal Revenue Code eliminated many older writeoffs associated with investment expenses: stock-borrowing fees, chat-room memberships, education, etc. But traders can get around these changes by forming S-corporations or partnerships and electing TTS.

“That status has always been better than investment status,” said Green, CEO of GreenTraderTax.com. “With the new tax act it becomes even more important. You get all the business deductions, and they expanded business deductions.”

Another potential benefit under the new law is that some trading gains could be deducted under a so-called qualified business income (QBI) pass-through provisions, he added. “It’s the icing on the cake.”

Green also expects traders paying ordinary income tax to benefit from lower ordinary income tax and cautioned viewers of a change in Roth IRA rules. Overall, Green said the changes resulted from President Donald Trump’s desire to promote manufacturing and small businesses over financial activities.

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