# Taxes on day trading US futures



## Crusherfied (May 5, 2016)

Howdy all,

I have talked both to a personal accountant and a tax specialist recently, but neither were very familiar with what I want to do. Was wondering if anyone here has been doing what I am about to do and if you can fill me in on the tax implications? 

I am looking at using the ThinkorSwim platform to *strictly* trade US *index futures* and nothing else. Basically I will be employing day trading techniques in my efforts. In my research it seems that CRA taxes day trading "securities" at 100%, and not the 50% cap gains. However, futures are not considered a security, so I am wondering if the 100% rule applies or not. The CRA definition does not include futures as far as I can tell.

Also, I am wondering if tax is withheld on the US side when strictly trading futures, but TD might be able to tell me that when I go in for a meeting to discuss this, I am thinking it will be. 

Would appreciate a response from anyone who has dealt with this or has experience in this area. Thanks!


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## Charlie (May 20, 2011)

I suspect you're looking for the answer you want rather than the one you're hearing.

100% income inclusion. No question about it.


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## Spudd (Oct 11, 2011)

I don't know much about futures but it seems to me, if they don't pay dividends, then the US would not withhold any tax. On regular capital gains they don't withhold tax.


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## Crusherfied (May 5, 2016)

Spudd said:


> I don't know much about futures but it seems to me, if they don't pay dividends, then the US would not withhold any tax. On regular capital gains they don't withhold tax.


That's kinda the vibe I have been getting. In talking with a person from TD Direct Investing, they said the US wouldn't withhold anything, unless one is up over $100K, but that was really only anything to do with dividends it seemed. 



Charlie said:


> I suspect you're looking for the answer you want rather than the one you're hearing.
> 
> 100% income inclusion. No question about it.


I'm actually not really hearing anything either way. Doesn't really matter to me either way. Sure, I would like to only pay cap gains rate, but in the end I will pay what is necessary. Just seems to not be much info out there on the type of trading I want to do. Basically I will be earning on a private level in a non-registered account, so my tax paying will be at the end of the year. I just want to make sure I am setting enough aside to cover for tax time. I guess if I set aside for 100% inclusion, I won't have a shock at the end of the year, and who knows, maybe even a pleasant surprise.


Spudd said:


> I don't know much about futures but it seems to me, if they don't pay dividends, then the US would not withhold any tax. On regular capital gains they don't withhold tax.


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## Eclectic12 (Oct 20, 2010)

Crusherfied said:


> ... In talking with a person from TD Direct Investing, they said the US wouldn't withhold anything, unless one is up over $100K, but that was really only anything to do with dividends it seemed.


I have no idea for whether the US withholds anything on the futures ... though it does sound similar to the way the US does not take withholding taxes on the capital gain for stocks.


As for the idea that one needs over $100K of dividend income before anything is withheld by the US ... this is completely wrong.

Case in point ... I have a few US shares that I bought through the employee share purchase plan. It paid less than $50 of dividend income, where the US gov't took their 15%.


The only way the US does withhold on dividends from a US stock that I am aware of is where the US stock that pays the dividends are held in an RRSP. 


It does not sound like you are receiving any dividend income from US investments so it won't matter. I am more concerned that if this US tax situation that is written about a lot has been missed ... how accurate is the rest? 




Crusherfied said:


> ... Just seems to not be much info out there on the type of trading I want to do. Basically I will be earning on a private level in a non-registered account, so my tax paying will be at the end of the year.


+1 on the not a lot of info.

I am not really sure what the "private" bit is supposed to mean. As I understand it, if the US takes taxes ... it will be taken off of the payments made.

For Canada, whether one can wait for the tax return to be filed depends on whether one fits the criteria to pay taxes in installments or annually.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/wh-eng.html




Crusherfied said:


> ... I guess if I set aside for 100% inclusion, I won't have a shock at the end of the year, and who knows, maybe even a pleasant surprise.


Don't forget that where one has to pay tax at 100% inclusion, some things that a run of the mill capital gains investor (50% inclusion rate) can't make use of, the income investor can.


Cheers


http://www.taxtips.ca/personaltax/investing/taxtreatment/capitalorincome.htm


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## Robillard (Apr 11, 2009)

Crusherfied said:


> In my research it seems that CRA taxes day trading "securities" at 100%, and not the 50% cap gains. However, futures are not considered a security, so I am wondering if the 100% rule applies or not. The CRA definition does not include futures as far as I can tell.
> 
> Also, I am wondering if tax is withheld on the US side when strictly trading futures, but TD might be able to tell me that when I go in for a meeting to discuss this, I am thinking it will be.


In general, there should be no US tax withholding on trading or capital gains. US withholding tax applies to certain classes of income paid to non-residents. Capital gains (that are directly earned from buying and selling securities) are generally not subject to withholding tax. Trading gains are probably considered to be "business profits" and should not be subject to US withholding tax.

I used to do daytrading of US stocks, and futures on rare occasions. The tax treatment is definitely business/regular income, not capital gains.

Incidentally, it is probably better for the trading income to be treated as business/regular income rather than capital gains. Earnings from short selling are basically never treated as capital gains. And I think any losses from daytrading would be treated as superficial losses. So it is better for your trading gains and losses to be offset. You pay tax on the net trading income. Also, you can deduct your business expenses (such as market access costs, certain account fees, charting and information costs, and possibly depreciation on computer hardware (I haven't explored this last point)) against your trading income.


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## james4beach (Nov 15, 2012)

Crusherfied said:


> That's kinda the vibe I have been getting. In talking with a person from TD Direct Investing, they said the US wouldn't withhold anything, unless one is up over $100K, but that was really only anything to do with dividends it seemed.


Does TDDI do futures? I didn't think they did.

I'm confused because in your first post it sounds like you intend to discuss futures with TD people.


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## Crusherfied (May 5, 2016)

james4beach said:


> Does TDDI do futures? I didn't think they did.
> 
> I'm confused because in your first post it sounds like you intend to discuss futures with TD people.


I have been paper trading using TOS, and the fellow I talked with at TDDI assured me that anything I was doing on Paper Money I could on live trading, and that included futures.


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