Tax Advantages of the Forex Marke

Tax Advantages of the Forex Market We all want to keep
as much of our profit as we possibly can, and the Forex market allows
us to do that. Even though you entered and exited your trade in the
Forex market within six months—just as you did for your stock
trade—only a portion (40 percent) of your profits is taxed as shortterm
capital gains. The remaining 60 percent of your profits get the
benefit of being taxed as long-term capital gains. This means that
you will have to pay 33 percent on only $4,000 and—according to
current long-term capital gains rates—15 percent on $6,000.
Portion Taxed as Short-Term Capital Gains
$10,000
40% = $4,000
$4,000
33% = $1,320
Portion Taxed as Long-Term Capital Gains
$10,000
60% = $6,000
$6,000
15% = $900
Total Taxes Paid
$1,320 + $900 = $2,220
You would have to pay only $2,220 with your Forex trade compared
to the $3,300 you would have to pay with your stock trade.
That is a savings of slightly more than 35 percent. Tax savings like
that can add up quickly.
You can also accumulate profits quickly by investing in the
Forex market within your IRA or other tax-deferred retirement
account. Many investors are unaware they can trade anything but
stocks and mutual funds within their retirement accounts because
their brokers have conditioned them to focus only on these asset
categories. Some brokers don’t want to deal with the extra work
that would come from allowing you to invest more freely. It isn’t
advantageous for them. On the other hand, other brokers believe
that you should be able to choose where you put your money.
Check with your brokerage firm and see if it offers self-directed
options in its retirement accounts.