Great Pacific Trading Company Las Vegas/Commodity Trading School
2013 TAX UPDATE-CHANGES FROM FISCAL CLIFF DEAL-COMMODITY FUTURES
DISCLAIMER NOTE-The information in this report has been compiled and prepared using sources believed to be reliable and accurate at the time of creation. The preparer, Commodity Trading School, Great Pacific Trading Company offer this report purely for information and educational purposes. The preparer of this report is not a licensed CPA, tax professional or legal consul. This report is designed as a supplemental outline to IRS guidelines and should not IN ANY WAY be used as an alternative to seeking the assistance and guidance of a licensed tax professional. Any financial or tax strategy decisions made as a result of the information contained in this report will be the full responsibility of the individual or entity authorized to make such decisions.
This report is being prepared to answer some of the basic questions that traders may have regarding how the US fiscal cliff deal of 2013 is going to affect tax treatment and rates on futures. The questions below are designed to address the changes to income tax rates, tax treatment of futures, and IRS filing procedures, if any. It is essential to review any and all changes to the tax laws and codes with your tax preparer or a certified tax professional.
- Q1. How did the 2013 fiscal cliff deal change the tax treatment of commodity futures?….As with most financial instruments, the tax rates for gains from futures trading increased for higher net worth individuals. In addition, those with incomes over a certain amount will have an additional 3.8% Medicare Tax added to their rate.
- Q2. Has the tax treatment of futures contracts been changed as a result of the fiscal cliff deal?…. Futures contracts are still treated under the special provision of a 60/40 split (60% long term & 40% short term capital gains). The rates themselves have been modified under the terms of the fiscal cliff deal, increased for higher income individuals and a Medicare tax of 3.8% added to their rate
- Q3. What are the income levels where the tax rates on futures have changed?…. Income tax rates for three filing statuses: single, married, head of household have increased to a top rate of 39.6%. For singles making over $400,000 per year, married-$450,000, head of household $425,000– income tax rates have increased. The 3.8% medicare tax has also been added to these income brackets. These rates are based on the filers AGI (Adjusted Gross Income)
- Q4 At what income level does the 3.8% Medicare tax come into effect? ….Again,this depends upon the filing status of the taxpayer. The Medicare tax come into effect at the 33% AGI income range. For single filers, this range begins at $183,250 married-$223,050, head of household $203,150.
- Q5. Does the fiscal cliff deal affect the tax deferred status of futures trading within an IRA account? ….Gains from futures trading within an IRA account maintain their tax deferred status.
- Q6. Has the IRS section that govern futures contracts changed?….Futures Contracts are still governed by IRS Section 1256-(60/40 capital gains rule).
- Q7. What are the individual tax rates across all income brackets since the 2013 fiscal cliff deal?….The chart below contains all 2013 individual tax brackets:
|Individ tax brackets||include 3.8% medicare||include 3.8% medicare|
|SINGLE||$0-8,925||$8,925- 36,250||$36,250-87,850||$87,850-$183,250||183,250-398,350||$400,000 +|
|MARRIED FILING JOINT||$0-17,850||$17,850-
|HEAD OF HOUSE-HOLD||$0-12,750||$12,750-$72,500||$48,600-$125,450||$125,450-$203,150||$203,150-$398,350||$425,000 +|
|Long Term CG||Taxed At||15%||15%||15%||15%||18.8%-||23.80%|
|Short Term CG||Taxed At||10%||15%||25%||28%||36.80%||43.40%|
|@1256 (60/40)||Taxed At||13%||15%||19%||20.20%||23.72%||31.64%|
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