Forex Taxation

Although currency trading has already taken place around the globe for many years now, the taxation, hence, is for US individuals, and the investment funds stay a mystery to many individuals.

This is not a surprise to the USA, since they are repeatedly changing the tax laws that are applicable to foreign currency, or for Forex trading. At the present, US individuals, and their investment funds, are always subject to the maximum federal tax rate of 23%; this is on their Forex currency trading increase.

They have provided timely elections and identification procedures. Without election and identification, Forex will increase, and be subjected to the maximum income tax of about 35%.

The income tax rates are about 35% in the United States; capital income will result from the sales of capital assets held in one year (or probably less). The currency traders will potentially subject two special supplies from the Internal Revenue Code.

First is Section 1256: This generally applies to regulating future contracts, and it provides that the taxpayers are holding for position at 60%. The long capital increase is at 40%. This is oftentimes called the 60/40 rule.

The taxpayers having the election should impound a statement to the tax return of the taxpayer, to confirm the election. The statement should have the following:

a) The description and date of every election that has been created by the taxpayer during the taxable year.

b) The statement that the election created during the year of taxation was done before the closing date of where the transaction has begun.

c) The description of any of the contract from the election, its effect, as well as the date that either the contract expired, was sold, or exchanged.

d) The statement in which the contract was part of the straddle.

e) Another statement, that has the transactions from the election, are also included and attached to the income tax return of the taxpayer.

The trading of foreign currency has futures contracts that are automatically subjected to Section 1256; this is the 60/40 treatment, not with the need to make identifications in respect in here.

Apart from the security that has been being offered by exchanging, the treatment of the 60/40 provides an advantage to forex trading future contracts.

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