Anyone know if forex capital gains are taxable as income in Canada?
Hello Trader 578
As a fellow Canuck, I have investigated this before, but you would benefit from a visit with a good tax accountant, preferably one who knows about trading (the visit is a tax-deductible expense). I believe that all world income must still be reported by Canadians, and this is what I have learned:
Option 1. Report trading income as normal income. Advantage - any annual net loss reduces other incomes, and you can fill out an extra form to claim all legitimate business expenses, including equipment depreciation, training courses, books, office space, you name it. Disadvantage - net gains are taxed at a higher personal income tax rate, i.e. anywhere from 25% to almost 50% or perhaps more, depending on your tax bracket.
Option 2. Report income from trading as capital gains, such as you would do for stocks, futures, etc. Taxed on half the gains, as you know. (Losses on the year cannot reduce other income, but can be carried over to future years against any profits. I have not done this carry-over before, and this should be checked for the latest rules.)
Option 3. Form a Trading business under your Provincial regulations and register as a home business. This costs about $250 where I live in NB, and can be done online. You would be taxed at a much lower corporate rate applicable to your Province, and would need to keep the proper records, etc. But you would need to check on any effect on insurance changes on the home, local municipal requirements (including effect on property taxes, etc). Municipalities can be weird with stuff like this, but I have not followed through on this idea yet.
That's the sum of my knowledge, but a good tax specialist will give you a lot of confidence. Be careful, some of them are nothing more than tax return specialists and really know nothing about the trader's needs.
I hope this helps in a some way. Pls let us know if you learn anything new.
Al
