If you're a day trader, while other normal people are celebrating the new year, you may be dreading it just like me because taxes, taxes, oh taxes, i've been a full-time day trader living in vancouver canada for many years now, and i've gotten tons of requests to go Over how exactly do we do taxes for day trading income? So we do not, god forbid, have to deal with the cra canadian revenue agency. After all, the spendings on covet relief and the money printing, the canadian government needs to collect their cash from somewhere. This is something i've heard from my very own cpa and other friends in the tax industry. This is why it's extremely crucial the canadians who trade stocks, crypto future or any securities asset, truly understand their personal tax implications.

So you do not get slapped with a huge tax bill in april in this video i'll, be discussing day trading taxes for canadians and going over. Some key topics for traders such as is day trading, income, considered, business, income or capital gains the key criteria. The cra looks for when deciding whether your income is considered business, income or investment income. If you made a lot of money from day trading or swing trading in 2021, well, that's music for the cra! It really doesn't matter how much money you make.

What matters is how much you get to keep and that's the reason i'm making this video to help you better understand, day trading taxes in canada and save more of your hard-earned money, a lot of time, research and, of course, my personal experience as a full-time day Trader went into making this video, so if you appreciate my efforts, please make sure to drop a like at the bottom of the video they'll. Tell me to make more educational videos like these in the future. First, let's get the most important question out of the way here is trading income, considered capital gains, income or business income? The reason it's very important for you to differentiate the two types of income is because capital gains is taxed way more favorably than business income. Business income is just like employment.

Income is 100 taxable, meaning if you make 100 000 from trading and that is filed as business income in 2021, then you have to pay around twenty six thousand dollars in taxes and your take-home income is only around seventy four thousand dollars. However, if you are filing capital gains income instead on that same one hundred thousand dollars, that means fifty percent of that profit is tax free. So the true taxable amount is only fifty thousand dollars. That equates to paying the cra only seventy six hundred dollars in taxes, and you get to keep the remainder of around 92 000.

As you can see, these two tax filing income types result in very different, take-home profits here. I'll just tell you right here that all of my personal income, which is 100 from day trading, are considered business income and they are 100 taxable. So, yes, every tax season is just brutal, but this is not the end all be all. There are actually many benefits of filing your trading income as business income.

I'll share more about this later on in the video to determine whether your personal trading activity falls under business, income or capital gains. Here are four main points to consider, but before i go there here is a quick disclaimer. I am not a financial advisor nor a cpa. I don't know anything about taxes.

All i do is huddle meme stocks, yolo calls and bitcoin. This video is for entertainment purposes. Only make sure to talk to a tax professional, to figure out your personal situation. Don't just listen to some guy on youtube.

Talking about taxes. Wait, i'm not even some guy on youtube to determine whether your personal trading activity falls under business, income or capital gains. Here. Are four main points to consider: how substantial is your trading income, basically how much money you're actually making is trading your only personal income source? How long do you hold the securities for and how often do you place your trading transactions? So, let's go over the first question, essentially how much money you're making from trading.

If it's just a couple thousand dollars, then the cra wouldn't really care, as that's probably not worth their time pursuing. However, if you're, making high five figures or 100 000 or even more from trading, then that's substantial and it's most likely going to be considered business income and that will be 100 taxable, especially if you do not have any other employment. And that takes us to the second question: to consider is day trading or swing trading, your only source of personal income, if you have an employment income making over six figures - and you have some short-term trading to supplement your income on the side making around 10 to 20 000 a year, then perhaps that trading income could be counted as capital gains, because twenty thousand dollars from trading is not as substantial or as much as your other income source. And second, you have a full-time employment income again just pay three hundred dollars and check with a cpa about this.

I am not a cpa. I only got b in math, but i did get an a in bad jokes. So that means, if you don't have any other employment income to declare, and you only have a trading income of one hundred thousand dollars or even fifty thousand dollars. You bet the cra will see your trading profit as business income.

Okay, now comes the third and the fourth question: how long do you hold the securities for and how often do you place the trades? I think this question is very easy to answer for day traders you open and close positions within the same day. That's why we're called day traders not week or month traders? Sometimes we even hold the securities for hours, minutes or even seconds so ask yourself about this: do you place trades every single day like a day trader or several times a week like a swing trader, then that income would be most likely considered business income because it's Very difficult to justify to the cra that the intention of these short-term and frequent trades are meant for investing personally as a day trader. I do participate in the market every single day and most days i make more than 10 trades a day, and there are some times where i make 30 50 or even more because day trading is my business, whereas if i was an investor claiming capital gains income, I most likely would just make one or two transactions per month: an investor isn't making buy or sell transactions every single day and is usually holding for a much longer period of time for weeks months or sometimes even years, because the security is meant to be an Investment for the potential long-term growth of the company, not as merely a vehicle for him to take advantage of the short-term price fluctuations. With that in mind, in my personal opinion and from my own experience, the first two questions: how much money you're making from trading and is trading your only personal income source, these two are still the most determining factors.

After all, it's probably not worth the cra's time and resources to pursue somebody making one hundred thousand dollars from employment income and they trade on the side to make five thousand or ten thousand dollars. I have a feeling if you're searching and watching videos on youtube about day trading taxes in canada, then first of all, congratulations. That means you probably made some decent profits in 2021. That also means your trading income will be most likely fall under business income, but don't worry, there are many tax deductions and benefits of doing so.

Since your trading is categorized as business income, not capital gains from investments. That means you have tons of business write-off opportunities. Some common ones are trading commissions, trading, education, program, scanner, fees, internet mortgage interest, and the list just goes on and on check out my video, where i detail all my day trading expenses to learn more. Essentially, you can deduct all the expenses you spent to generate that trading income.

So if you made one hundred thousand dollars from trading and spent twenty thousand dollars on the business expenses, then only eighty thousand dollars of that profit is taxable income all the common tax deductions. I mentioned earlier are just the most basic and legal strategies to reduce the total income taxable from your trading in the next video. In part, two of day trading taxes for canada, i will be discussing the more advanced way many full-time day. Traders can save more money on taxes.

I've been day trading for over seven years now, and i've learned so much along the way to be more tax efficient, such as business structures for trading money management in tfsa, rsp and capital gains investing for day. Traders i'll be covering that in part 2 of this video so make sure to subscribe and ring that notification bell. So you will be notified when that video is ready, i'll link to some more tax resources for you in the description below. Thank you guys so much for watching.

As always, i'm the humble trader and i'll see you guys next time you.