If you're a day trader while other normal people are celebrating the new
year you may be dreading it just like me because...
TAXES!
Ohh... TAXES!
I've been a full-time day trader living in Vancouver, Canada for many years now
and I've gotten tons of requests to go over how exactly do we do taxes for day
trading income, so we do not, god forbid have to deal with the C.R.A
Canadian Revenue Agency after all the spendings on COVID relief and the money printing.
The canadian government needs to collect their cash from somewhere. This is
something I've heard from my very own CPA and other friends in the tax
industry. This is why it's extremely crucial canadians who trade stocks
crypto future or any securities assets truly understand their personal tax
implications so you do not get slapped with a huge tax bill in april. In this
video I'll be discussing day trading taxes for canadians and going over some
key topics for traders such as: Is day trading income considered business
income or capital gains the key criteria the CRA looks for when deciding whether
your income is considered business income or investment income if you make
a lot of money from day trading or swing trading in 2021 well that's music for
the CRA it really doesn't matter how much money
you make what matters is how much you get to keep and that's the reason i'm
making this video to help you better understand the day trading taxes in
canada and save more of your hard-earned money a lot of time research and of
course my personal experience as a full-time day trader went into making
this video so if you appreciate my efforts please make sure to drop a like
at the bottom of the video they'll tell me to make more educational videos like
these in the future first let's get the most important question out of the way
here is trading income considered capital gains income or business income
the reason it's very important for you to differentiate the two types of income
is because capital gains is taxed way more favorably than business income
business income is just like employment income is 100 taxable meaning if you
make 100 000 from trading and that is filed as business income in 2021 then
you have to pay around twenty six thousand dollars in taxes and your
take-home income is only around seventy four thousand dollars
however if you are filing capital gains income instead on that one hundred
thousand dollars that means fifty percent of that profit is tax free so so
the true taxable amounts is only fifty thousand dollars that equates to paying
the cra only seventy six hundred dollars in taxes and you get to keep the
remainder of around 92 000 as you can see these two tax filing
income types result in very different take-home profits here i'll just tell
you right here that all of my personal income which is 100
from day trading are considered business income and they are 100
taxable so yes every tax season is just brutal
but this is not the end all be all there are actually many benefits of filing
your trading income as business income i'll share more about this later on in
the video to determine whether your personal trading activity falls under
business income or capital gains here are four main points to consider but
before i go there here is a quick disclaimer i am not a financial advisor
nor a cpa i don't know anything about taxes all i do is huddle meme stocks
yolo calls and bitcoin this video is for entertainment purposes
only make sure to talk to a tax professional to figure out your personal
situation don't just listen to some guy on youtube talking about taxes wait i'm
not even some guy on youtube to determine whether your personal trading
activity falls under business income or capital gains here are four main points
to consider how substantial is your trading income
basically how much money you're actually making is trading your only personal
income source how long do you hold the securities for and how often do you
place your trading transactions so let's go over the first question essentially
how much money you're making from trading if it's just a couple thousand
dollars then the cra wouldn't really care as that's probably not worth their
time pursuing however if you're making high five figures or 100 000 or even
more from trading then that's substantial and it's most likely going
to be considered business income and that will be 100 taxable especially if
you do not have any other employment and that takes us to the second question to
consider is day trading or swing trading your only source of personal income if
you have an employment income making over six figures and you have some
short-term trading to supplement your income on the side making around 10 to
20 000 a year then perhaps that trading income
could be counted as capital gains because twenty thousand dollars from
trading is not as substantial or as much as your other income source and second
you have a full-time employment income again just pay three hundred dollars and
check with a cpa about this i am not a cpa i only got b in math but i did get
an a in bad jokes so that means if you don't have any other employment income
to declare and you only have a trading income of one hundred thousand dollars
or even fifty thousand dollars you bet the cra will see your trading profit as
business income okay now comes the third and the fourth question how long do you
hold the securities for and how often do you place the trades
i think this question is very easy to answer for day traders you open in
closed positions within the same day that's why we're called day traders not
week or month traders sometimes we even hold the securities for hours minutes or
even seconds so ask yourself about this do you place trades every single day
like a day trader or several times a week like a swing trader then that
income will be most likely considered business income because it's very
difficult to justify to the cra that the intention of these short-term and
frequent trades are meant for investing personally as a day trader i do
participate in the market every single day and most days i make more than 10
trades a day and yeah i make 30 50 or even more because day
trading is my business whereas if i was an investor claiming capital gains
income i most likely would just make one or two transactions per month an
investor isn't making buy or sell transactions every single day and it's
usually holding for a much longer period of time for weeks months or sometimes
even years because the security is meant to be an investment for the potential
long-term growth of the company not as merely a vehicle for him to take
advantage of the short-term price fluctuations
with that in mind in my personal opinion and from my own experience the first two
questions how much money you're making from trading and it's creating your only
personal income source these two are still the most determining factors after
all it's probably not worth the cra's time and resources to pursue somebody
making 100 000 from employment income and they trade on the side to make 5 000
or i 10 thousand
feeling if you're searching and watching videos on youtube about day trading
taxes in canada then first of all congratulations that means you probably
made some decent profits in 2021 that also means your trading income will be
most likely fall under business income but don't worry there are many tax
deductions and benefits of doing so since your trading is categorized as
business income not capital gains from investments that means you have tons of
business write-off opportunities some common ones are trading commissions
trading education program scanner fees internet mortgage interest and the list
just goes on and on check out my video where i detail all my day trading
expenses to learn more essentially you can deduct all the
expenses you spent to generate that trading income so if you made 100 000
from trading and spent 20 000 on the business expenses then only 80
000 of the profit is taxable income all the common tax deductions i mentioned
earlier are just the most basic and legal strategies to reduce the total
income taxable from your trading in the next video in part two of day trading
taxes for canada i will be discussing the more advanced way many full-time day
traders can save more money on taxes i've been day trading for over seven
years now and i've learned so much along the way to be more tax efficient such as
business structures for trading money management in tfsa rsp and capital gains
investing for day traders i'll be covering that in part two of this video
so make sure to subscribe and bring that notification bell so you will be
notified when that video is ready i'll link to some more tax resources for you
in the description below thank you guys so much for watching as
always i'm the humble trader and i'll see you guys next time
[Music]
you