Do you pay taxes on profits from day trading?

Asked 3 years ago

Hey guys, I've got a ton of stock trading tax-related questions. Do you pay tax on day trading profits? If so, how much do you get taxed for day trading, and how do I calculate it? Does it count the same as an income tax? Do you know if there is any way to avoid it? Thanks!

Tax law Tax payments Day trading

Andia Rispah Igobwa

Friday, September 10, 2021

Generally, if you make more than $400 in profit, then you must pay taxes. Some people think that they are not subject to paying taxes because they're trading stocks, but according to the IRS, this is not true.
If you make more than $1,500 in profit each year from your day trading, you need to file a tax return with the IRS. If you do not file your trading profits with the IRS, severe consequences can be fined 5% of your total income and even being charged with a misdemeanor of fraud.
It does not count as income tax. You are taxed differently on your day trading profits when it comes to capital gains taxes.
Capital gains taxes are only applied to stocks that you have owned for more than a year, and this can be one of how you avoid paying capital gains tax if you prefer not to sell your stocks right away.
Avoiding taxes is not an easy task, and there are no guarantees. If you're interested in avoiding taxes, you can speak to a tax lawyer for more information on how to go about doing this.