Can I Make A Living Trading Stocks

Are losses on stock trading tax deductible?

Hi,

You report all sales on Schedule D of Form 1040. You net out losses and gains, keeping short and long term separate initially and then net out whatever remains. If you have a net short term gain at the end it’s taxed at your marginal rate. If you have a net long term gain it’s taxed at a reduced rate, either 0% of 15% depending upon your marginal rate.

Once you’ve offset all gains and losses against each other if you have a loss at the end you can use up to $3,000 of the losses against other income and then carry the remaining loss forward to the next tax year. You then net that against any gains that year and then use up to $3,000 against other income and carry forward again and repeat this process each year until the remaining loss is used up.

As you are learning the hard way, day trading is best left to the experts with many years of experience. Even they will have losing years as day trading is little more than legal gambling. This year is a particularly brutal one for novices. It was easy to pick winners back in February and March as the market had bottomed out and was recovering. But on any given day it could retreat especially when day traders and short-term investors bailed to try and nail down their profits. Buy and hold investors have made staggering amounts of money since February — many more than quadrupling their stakes — but day traders have frequently taken a bath.

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