taxation

[alen]

when one trades options, how are the gains taxed?

 

[Rhody Trader]

Essentially like any other capital gain.

 

[alen]

do you know any sites that explain how the tax is collected? thx.

 

[Rhody Trader]

It's not "collected". You're responsible for paying your gains (or getting credit for your losses) when you file your taxes. Go to www.irs.gov.

 

[alen]

so lets say that the tax rate is 25%. excluding getting credit for ones losses, is one taxed 25% for the capital gain in each individual trade one made during the past year, or is one taxed 25% for the total capital gain over the past year?

 

[Rhody Trader]

Total for the year, though if you've got good profits through the year, you may have to pay estimated tax along the way.

 

[osho67]

My understanding is as follows:

You have CGT allowance for each year-roughly 10000 GBP for wqhich there is no tax liability and you donot fill any tax forms,unless you want to carry forward your losses to future years.

Above your allowance the tax is flat 40% on the excess.

Can anybody tell what happens when you spreadbet in the options? Is it totally yax free?

Thanks

 

[Profitaker]

osho

Turnover in excess of £ 32,800 must be declared, regardless of any gain or loss.

Tax free allowance is £ 8,200 in the 04-05 tax year.

The % rate you pay depends on your overall income. Capital gains are added to any earned income to determine which tax band you're in.

SB - believe it's totally tax free, but not 100% sure.

For options I use the Date of sale as the tax point. So when shorting options, I have to wait until either I close or expiry before I can fill in the return. That may be some months into the next tax year.