Categories: Income

Modified Adjusted Gross Income: All You Need to Know About Forex Trading

Modified Adjusted Gross Income (MAGI) is a measure of total income used to determine eligibility for certain tax credits and deductions. It is calculated by adding all above-the-line deductions — such as student loan interest, contributions to certain retirement accounts, alimony, and half of self-employment taxes — to an individual’s gross income. MAGI can also play a role in determining the Foreign Income Exclusion, which allows certain taxpayers to exclude certain foreign-earned income from taxation. This can be an important tool for those attempting to manage their foreign exchange exposure and gain tax savings.

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Categories: Income

Tax Burden by State & Income: An Overview of Forex Trading

The tax burden imposed by state governments varies significantly depending on an individual’s income level. Those earning higher incomes usually bear a larger portion of the total tax burden than lower-income earners. To illustrate, in 2017 California imposed the highest taxes per capita in the U.S. On average, taxpayers with incomes in excess of $1 million bore 8.2% of their income in taxes compared to only 5.3% for taxpayers with incomes of $10,000 or less. Similarly, New York ranked third in per capita taxes, with those earning over $1 million paying an average of 8.1%, compared to 8.7% for taxpayers earning less than $20,000. Although taxes at the state level can increase the total burden on higher-income individuals, many states offer tax credits and deductions to lower-income earners.

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Categories: Income

Define Taxable Income: An Overview of Forex Trading

Taxable income from forex trading depends on the country that you live in. Generally, it is the net of your total trading revenue less trading expenses, such as commissions and other costs associated with trading. Some countries, such as the US, consider profits made from forex trading to be taxable under specific laws. Your profits and losses are subject to taxation as per standard capital gains laws, and gains could be taxed at either short-term or long-term capital gains rates, depending on the holding period.

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Categories: Income

Income Tax Definition: Understand Your Forex Trading Taxes

Income tax is a tax imposed on individuals or entities that varies with fluctuating levels of income or profits (taxable income). Income tax generally is computed as the product of a tax rate times taxable income. Tax rates may vary by type or characteristics of the taxpayer. The tax rate may increase as taxable income increases (referred to as graduated or progressive rates). Tax rates may vary for different types of income. In some tax systems, certain types of income may be taxed at different rates than other types of income. For example, tax rates may be higher for unorthodox methods of acquiring income such as earned income from gambling. The tax rate also may be different for natural persons and corporations. The tax rate may change from year to year to account for general changes in market wages.

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Categories: Capital

Long-Term Capital Gains in Forex Trading: An Overview

Long term capital gains in the Forex market provide the opportunity to grow profits over time. By holding onto positions for extended periods, traders gain from the appreciation of their asset in price and benefit from the advantages of compounding interest. Long term capital gains with Forex involve far less risk than traditional day trading practices, and are available to all types of traders, from beginners to experienced investors. Long term positions often come with reduced fees, and market veterans have the ability to take advantage of the wide array of trading tools available to enhance their returns.

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Categories: Capital

Capital Gains vs Sales Tax: Differences & Impacts on Forex Trading

Capital gains and sales tax are two important considerations in forex trading. Capital gains taxes are taxes paid on profits from the sale of a capital asset, such as stocks, bonds, or foreign currencies. They are determined by subtracting the cost basis of the asset being sold from the sale price. Sales tax, on the other hand, is a tax imposed on the sale of goods and services and is usually collected at the point of sale and is based on the price of the item. While both are taxes, they can have significantly different implications when trading forex. Capital gains taxes can be high and may reduce the potential returns on an investment, whereas sales tax can be avoided by making trades in certain jurisdictions. Careful consideration of both taxes is important, as they have the potential to impact the bottom line of a forex trader.

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Categories: Ratio

What is an S Corporation? An Overview of Taxes & Benefits

An S Corporation is a type of corporation that is designed to offer certain tax advantages over regular corporations. An S Corporation is required to elect a status with the US Internal Revenue Service (IRS), which provides them with many of the same advantages that a traditional corporation enjoys, such as reduced taxes on corporate income, along with protection from personal liability for the company’s debts and liabilities. As an S Corporation, profits are only taxed at the individual level and are not subject to double taxation, meaning business income is not subject to corporate income tax. In addition, losses incurred in the operation of the business can be deducted from individual incomes.

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