In late December 2017, the president signed the Tax Cuts and Jobs Act, enacting major tax reforms. The changes introduced by this Act will have some significant implications for investors. To help traders understand these effects, we invited Robert Green, CPA and CEO of GreenTraderTax.com, to give a webinar on the subject. In his presentation, titled “How the Tax Cuts and Jobs Act Impacts Investors, Traders, and Investment Managers,” Green discussed the most important effects of this tax reform and how traders can adapt their business strategy accordingly.
This webinar represents the latest in a series intended to educate investors about important industry concepts and provide them with effective approaches to trading. Besides offering some of the best stock trading platforms on the market, we serve as a resource for traders that seek to learn and grow.
In general, Green noted that tax rates were lowered across the board. The Act reduced the tax rate for corporations from 35% to 21%. On top of that, ordinary taxes were lowered across all brackets. These changes will naturally affect traders due to the extra capital entering the market. Consumers will have more money to spend, and companies will have more funds to invest. Traders should monitor trends carefully to maintain profitability and capitalize on movements in the market.
More significantly, however, Green pointed out that many deductions were eliminated. Traders will especially miss the ability to deduct investment expenses, which was removed altogether. The loss of this deduction impacts individual traders the most. For example, a lone short seller will no longer have the ability to deduct stock borrow fees, harming their profitability.
Because traders can no longer deduct investment expenses, Green stated that most will likely try to qualify for Trader Tax Status (TTS). This status allows investors to use business treatment for trading expenses. If they qualify, they can potentially benefit from the C-Corp 21% flat tax rate and a 20% deduction on pass-through qualified business income. Obtaining TTS will likely be essential for traders that want to maximize their profits.
“How the Tax Cuts and Jobs Act Impacts Investors, Traders, and Investment Managers” can be viewed in full here.
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