Federal Capital Gains Tax: An Overview for Forex Traders
The federal capital gains taxes imposed upon profits from foreign exchange trading can be significant. As a taxable event, any profits made are subject to all applicable capital gains tax rates and short-term versus long-term capital gains tax implications. Knowing the correct classification of capital gains is of paramount importance for traders subject to the Internal Revenue Service (IRS). Additionally, foreign exchange traders should be mindful of the different tax treatment associated with Section 1256 contracts. With careful planning, though, the tax burden on currency trading can be greatly reduced.