CLAIM TTS

While it sounds like a formal certification or license you apply for upfront, Trader Tax Status (TTS) is actually an unclaimed election/classification status claimed on your tax return. You determine whether you qualify based on your activity, and if audited, the IRS evaluates your qualifications. Speak to your CPA ASAP about claiming TTS on your next tax filing. This is a long game. It requires some minimal planning. Becoming a professional trader is EXTREMELY doable. So, let's start understanding what we're really talking about here. 

The IRS defaults everyone to "Investor" status. To qualify as a "Trader" carrying on a trade or business, you must meet strict requirements: 

• Frequency & Continuity: You trade almost every day the market is open (typically 4+ days a week, hundreds of trades per year). 
• Holding Period: You seek to profit from short-term market swings rather than long-term appreciation or dividends (holding positions for days or hours, rather than months). 
• Substantiality: Your trading activity involves substantial dollar volume and represents a primary business/income effort. 

• Business Expense Deductions: You can file a Schedule C to deduct trading-related expenses (computer equipment, market data feeds, office supplies, trading software, margin interest). 
• No Self-Employment Tax: Profits from TTS trading are not subject to self-employment tax (SE tax). 

Traders often pair TTS with a Section 475(f) Mark-to-Market election. This changes how your gains and losses are treated: 

• No $3,000 Capital Loss Limit: Capital losses are converted to ordinary business losses, meaning you can use unlimited trading losses to offset W-2 or other taxable income. 
• Exempt from Wash Sale Rules: You do not have to account for wash sale adjustments at year-end. 
• Year-End Accounting: All open positions are treated as if sold on the last business day of the tax year at fair market value. 

A mark-to-market declaration must be made for your brand new (without any tax history) Trading LLC within 75 days of its incorporation. This is a MUST-DO filing that makes ALL the difference ovr time. So, make a plan. Learn more HERE.