RRSP/TFSA/Cash Margin Acc/Taxes

[Al Savard 0]

I live in Ontario

Wondering how people are dealing with taxes on gains and other fees/expenses? Are you guys/girls running your day trading like a business and claiming expenses or going the RRSP or TFSA route?

[Robert H 455]

Hi Al, you can't trade properly inside of a TFSA/RRSP. First, there is no margin leverage. Second, you can't short stocks. And third, CRA may come knocking if they find your account to be used for frequent day trading. I read some articles where people had to pay large taxes/penalties once their TFSA was deemed to be 'too big'. It's a shame really; I'm sure they don't care if you only had losses in there lol.

 

I recently went live and will be speaking to a tax advisor in the coming months. I'll make sure to post a Canadian-version of this very informative U.S. Tax Preparation post.

[Nelson 2]

Al, Great Question.  I too am looking for additional info as I am relatively new this world and am in the setup stage.

 

Andrew/Robert, I am located in Canada (Toronto) and have setup a TFSA account with my Financial Institution along with an Interactive Brokers account.  I have submitted an EFT request and for this example lets assume it's $10,000.  If I am able to grow the $10K to $100K, will the additional $90K count towards my TFSA limit?  I ask this because the additional $90K will be in the Broker Account and if I transfer it to the TFSA then its considered a deposit is it not?....I didn't necessarily grow it in the TFSA as it was ported out and in.  I realize this question is more geared towards an Accountant, however I thought I would ask in the event you understand this more than I.

[Robert H 455]

If your IB account is a cash or margin account, then it has nothing to do with your TFSA.

 

If you deposit $90k to your TFSA then it does count toward your contribution limit. Doesn't matter if the money came from day trading or the casino. A deposit is a deposit. Hope that answers your question.

[Nelson 2]

Thanks Robert.  My IB Account has been setup as a TFSA Account.  I assume this acts as an additional TFSA Account and that any contributions on this IB Account and my Financial Institutions will count towards the TFSA limits, however any growth (assuming I become a successful trader) in the IB Account is where I may be able to realize the benefits....am I correct in assuming this?

 

To my understanding, my setup as a Canadian has been configured correctly and similar to Andrew's reference in his book.   Your thoughts?

[Robert H 455]

Nelson, as mentioned above you won't be able to short or use margin in a TFSA. You can still trade in it, but be aware that CRA frowns upon full-time or professional trading within that vehicle. I would speak to a tax professional on the matter. Note that Andrew and myself use a margin account for our active day trading.

 

Capital gains you make inside your IB TFSA will be tax free. And yes, any deposit into your IB TFSA counts towards the contribution limit. TFSA limit is calculated from all accounts across institutions (similar to an RRSP).

[Al Savard 0]

When you file your taxes Robert are you claiming as a business or investment income. If I understand this correctly you can't right off expenses or losses if your not a business but you will get taxed more. I realize tax is unavoidable I just  don't like paying more than I have to!!!

 

I've been live for three months now with some big losses I was assuming I could just download the account summary off the IB site for tax purposes. I just read on some of the other threads that people are using a program that is helping with filing the taxes making easier and less labour intensive for the accountant Is this something that I should look into?

 

Are you part of the bear bulls team or a member? Are you or someone you know willing to help and mentor. I'm looking to quit my six figure job sooner than later to do this full time. I have been off since February with a wrist injury and have been working at day trading full time I had hoped that by now I would have been consistent so that I could of quit. Discipline seems to be my biggest fault.

 

 

[Robert H 455]

Al, I went live around the same time you did so I haven't filed taxes yet. I'll be hiring an accountant/tax professional to ensure that everything is done correctly. I recommend you do the same.

 

As for the program to help file taxes, was that the US thread? Most brokers provide forms come tax season and this is what your accountant needs.

 

For reasons mentioned above, I'm not in a position to be mentoring lol. Bear Bull Traders doesn't provide one-on-one mentorship; your best bet is the Lifetime Membership for a more personal learning experience, or just participating in the forums. Best of luck!