| Forex Trading has Tax Advantages |
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Forex trading lets you profit from the financial markets no matter what happens to stock markets. Stock markets can go up and down but you can always profit from forex markets.
Forex trading lets you profit from the financial markets no matter what happens to stock markets. Stock markets can go up and down but you can always profit from forex markets. You can profit from forex trading whether there is inflation or deflation. You can profit from forex whether interest rate goes up or down. When you invest in financial markets, you have to pay a short term capital gain tax, if you take profit from a security within one year. Short term capital gains are taxed at your current tax rate. And if you hold the security for more than one year before you take profit, you will have to pay long term capital gain tax. Long term capital gains are taxed at a rate of 15% only. But if you invest in forex markets, 60% of your profits will be taxed as long term capital gains and only 40% will be taxed as short term capital gains whether you hold a currency for one minute, one hour, and one month or more. Lets take an example. Suppose you invest $10,000 in stocks and $10,000 in forex. Your tax bracket is 33%. Suppose you made a profit of $10,000 in both stocks and forex each in six months. Since, you are in 33% tax bracket and you took profit within six months on stocks, your profits will be taxed as short term capital gain. That means you will have to pay $3,300 as tax and your profit after taxes will be only $6,700. It doesnt matter whether you took profit in six months or one year in forex, 60% of your profit will be treated as long term capital gain and 40% will be treated as short term capital gains. It means 60% of $10,000 will be taxed as long term capital gain at only 15% which is (0.6)(10,000)(0.15)=$900. 40% of your profits in forex will be taxed as short term capital gains at your current rate of 33%. It calculates to (0.4) (10,000) (0.33) = $1,320. The total tax that you pay on forex investment will be $900+$1,320=$2,220. Compare this with $3,300 that you paid on stock investments. The tax savings on forex investment like these can add up fast and accumulate into a sizable amount in your IRA or other tax deferred accounts. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading; stocks and forex. Learn Penny Stock trading. Read about Trend Forex System. Best Forex Signal Service. |