Deduction for being a stock trader

External question — Personal Finance Stack Exchange Author: Bob Original post: https://money.stackexchange.com/questions/169237 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. A person aggressively trades the stock market. They trade nearly every day of the year the stock market is open. They do this from an area of their home which they used exclusively for trading. It is my belief that the take the home office deduction on their tax return? Am I right about that? In addition, those expenses should be deducted using Schedule C. Am I right about that?

External answer — Personal Finance Stack Exchange Author: littleadv Original post: https://money.stackexchange.com/a/169238 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. If the trading activity raises to the degree of active trade or business, and the use of home satisfies the requirements for the deduction - then yes, it's deductible. Since the question assumes the conditions to hold then the answer is inevitably "yes". Whether the conditions actually hold depends on the actual facts and circumstances. Use of home deduction is a known audit trigger.

External answer — Personal Finance Stack Exchange Author: MTA Original post: https://money.stackexchange.com/a/169239 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. A person who is a small business owner may take a home office deduction. An employee i.e., someone who works for another person or company, may not. IRS Tax Tip 2022-10 lists these two essential qualifiers: Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction: There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business. The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

External answer — Personal Finance Stack Exchange Author: Solarflare Original post: https://money.stackexchange.com/a/169242 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. To be able to deduct something as a business expense, it needs to be a business expense you have to have a business MTAs answer gives you a check for the first one. Whether your activities on the stock market are considered a business for tax purposes will depend on whether you are a trader (then it is a business) or an investor (then it is not a business). The IRS defines a trader in securities for tax purposes , and those Traders report their business expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). To be considered a trader (as opposed to an investor , which cannot deduct their expenses), you have to adhere to some criteria: You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation; Your activity must be substantial; and You must carry on the activity with continuity and regularity. This usually means you need to be a day trader . Specifically, your profits cannot be from long term holdings . Anything you hold long term (where long term will be measured in day(s)) will be considered an investment, and you cannot deduct costs related to that part of your portfolio. You are usually also expected to not only trade every day, but for some hours per day, just as if it would be an actual job. Doing some trades in the evening after work will almost certainly not qualify, even if they are substantial. The income from your day trading activities should be a reasonable income (e.g. you should be able to live from it, just as if would be an actual job). You can declare yourself a trader, and you do not pay extra business taxes. You should however document everything properly (especially seperate investments from day trading , if you do both), and double check if you fulfill the requirements.