# Day Trading Tax



## ali79uk (Feb 16, 2015)

Hello,

I am moving to Toronto in July, and intend to continue day trading as I currently do.

I wanted to know how things work with respect to the treatment of day trading income.

I trade frequently and expect myself to be classed as having Income and not capital gain. With that in mind I had the following questions which I will try to illustrate with numbers.

Suppose I am making an income via trading of $300,000 Gain and $90,000 loss and $10,000 fees so $200,000 (CAD) net income less transaction fees and have subscription costs (data and analysis feeds etc) of $5,000 (CAD). In addition I work from home and have a computer I bought for $3,000 (CAD). 

Does it mean the following in terms of tax calc?

Income 300,000.00 
Loss 90,000.00 
Fees 10,000.00 
Subscription Costs 5,000.00 
Computer 3,000.00 
WORK FROM HOME ? 
NET BEFORE TAX 192,000.00

TAX
Fed 15% 28,800.00 
Fed 22% 10,363.22 
Fed 26% 4,163.68 
Fed 29% 1,671.90 
Pro 5% 9,600.00 
Pro 9% 6,075.16 
Pro 11% 2,235.14 
Pro 13.16% - 
NET AFTER TAX 129,090.90 


My questions are as follows: 
1) what am I allowed to claim for my working from home?
2) Is the net after tax for me to do as I wish or is this "Company money", so do I still need to pay this to myself via a salary?
3) What is the most tax efficient structure?
4) Do I need to create a business as its just me and I will just trade frequently?

Your thoughts and help would be greatly appreciated.

Regards


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## Guban (Jul 5, 2011)

You can claim basically your expenses to earn your income. See form T2125. This may include home office expenses.

Note that you can't write off your entire computer purchase. You need to capitalize it, and write it off gradually.

Unless you are incorporated, the company's money is your money. It may be worth your while to incorporate, so you may need to talk to an accountant.


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## ali79uk (Feb 16, 2015)

Guban said:


> You can claim basically your expenses to earn your income. See form T2125. This may include home office expenses.
> 
> Note that you can't write off your entire computer purchase. You need to capitalize it, and write it off gradually.
> 
> Unless you are incorporated, the company's money is your money. It may be worth your while to incorporate, so you may need to talk to an accountant.


Thanks I shall have a look at the form you mentioned.

Regarding Incorporation, can I do that if I am just trading with my savings? and if I can wont I be taxed twice, first via Corporation tax and then by Income tax?


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## Davis (Nov 11, 2014)

The corporation pays tax on the money you leave in the corporation. So salary is a deductible expense for the corp, and income for you. Dividends are not a deductible expense for the corp, so they are paid out of after tax income. Dividends are income for you, but you get a tax credit to recognize the tax already paid at the corporate level -- this avoids the double taxation. Don't forget to factor in legal and accounting costs of having a corp. it may not be worth it to you. 

Home office expenses are a legitimate deduction if you do most of your work there and have a dedicated space. this can include a portion of your rent or property tax, utilities, etc., but you should have one room set aside for this purpose, not your dining room table.


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## CPA Candidate (Dec 15, 2013)

An investment corporation pays a significantly higher rate of tax on investment income than an active operating company does on business income. Any advantage to using a corporation for holding passive investments has largely been removed.


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## ali79uk (Feb 16, 2015)

Ok thanks that is useful,

another quick question, is registraing a business and incorporating a business the same thing.

I read somewhere on here that I need to register as a business if I want to deduct home office expenses (I will have a dedicated space that will only serve as my office, seperate phone and internet connection). Is this true, or do I indeed just pay tax as an individual but using forms mentioned above. ie Do I need to actually register myself as a business and is there any advantage to that.

I am finding guidance very hard to come by on the CRA site, where as here in the UK it is quite straight forward with illustrated examples, so you can pretty easily figure out the methods of various tax structures and what the best route maybe for you.

Appreciate your help.


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## nobleea (Oct 11, 2013)

ali79uk said:


> Ok thanks that is useful,
> 
> another quick question, is registraing a business and incorporating a business the same thing.
> 
> ...


You will probably have to register your business in the city you operate in. This is just a license and really just a tax. But if you intend to be a sole proprietorship (ie not incorporating), then I don't think there's a need. There are self employment income forms on the income tax package where you can deduct all your valid costs. If you want to operate as some fancy company name (ie not your name), then you'd have to pay to register the name, trademark, etc. But there should be no need for that outside of ego.


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