Forex Reviews

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.


Long Term Capital Gains Tax in Forex Trading: A Guide

Investing in foreign exchange (Forex) can be very profitable, but it’s important to know how long term capital gains taxes work when trading currency. Long-term capital gains taxes are taxes imposed on the profits from investments held for more than one year. These taxes are generally lower than taxes for investments held for short periods of time and are generally applied to investments held for more than one year. When trading Forex, long-term capital gains apply to any investment that has been held for more than twelve months. It’s also important to remember that a trader may have to pay taxes on capital gains and losses at the time they are realized, rather than when the investment position is closed. As such, it’s important to understand the tax implications of the investments you make in Forex trading.