Avoiding/reducing taxes

Discussions about Money Management and Risk Control.
Post Reply
Trading Leech
Senior Member
Senior Member
Posts: 48
Joined: Mon Nov 29, 2010 2:07 pm

Avoiding/reducing taxes

Post by Trading Leech » Tue Feb 14, 2012 11:12 pm

Because of taxes, I'm considering just not trading at all. If I project out for 30 or 40 years and actually look at the mass amounts of money that the authorities are going to confiscate from me during my trading career, I wonder whether it's worth it. At least, it's making me severely depressed.

Do you have any ideas? How do you deal with these thoughts? Have you considered moving to low-taxed countries? I know of Cayman Islands. Any other suggestions for a trader to move to? Even Switzerland and Liechtenstein seem to have pretty high tax burdens when counting in all local taxes.

Or maybe I should just stop worrying about it...

Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto » Wed Feb 15, 2012 5:23 am

you sound like my father.....he once said the aim of business is to avoid paying taxes.
I thought the aim of business was to make money, and then minimise the taxes, but I tell you what....... while it hurts I will always, always be happy to pay taxes as i know it means I have made money. Plus my view is that we live in a society, not just as individuals.

The rate of taxes, where it is spent and the complications are a whole other thing. :) so we see your point, but to say you cant be bothered because you might pay taxes ?????? crazy.

mojojojo
Roundtable Knight
Roundtable Knight
Posts: 131
Joined: Mon Oct 31, 2005 2:07 pm

Post by mojojojo » Wed Feb 15, 2012 11:30 am

I have yet found a way for me to make money and not pay taxes (legally). It's really something that you can't avoid. You can minimize it by obtaining a citizenship in a country that doesn't tax foreign income and setup a "trading business" outside of that country. That's about as close as your going to come as far as I know.

Aka77
Full Member
Full Member
Posts: 14
Joined: Fri Dec 23, 2011 4:46 pm

Post by Aka77 » Tue Feb 28, 2012 6:37 am

As a staunch libertarian of the Rothbardian coterie,I can relate to your issue,which for me carries not only a monetary,but an ethical value as well.
If you are an American citizen,I suspect your only possibility is to follow the steps of the large fund managers and try to have the bulk of your income taxed as long term capital gains,hoping that the loophole doesn't get closed soon.
If you are not an American citizen and have the willingness/possibility/ability to relocate,then your problem has a pretty simple solution.
If it makes economical sense for you,move to Monaco,otherwise you might consider Andorra,Malta,the UK,Hong Kong,Singapore,Bahamas or other Caribbean tax havens,Paraguay,Uruguay and the list goes on and on:with careful research you'll find that there are still quite a few spots left on the map where you can enjoy relatively little harassment from the taxman.
If it doesn't make economical sense yet,focus on building a good system,trade it and increase your capital to a point where it makes sense to join the ranks of the tax exiles(who in my experience pay an emotional/psychological price as well).
In any case,I would focus on making money first and then figuring how to retain the most of it.Inverting the process could prove very expensive.

sluggo
Roundtable Knight
Roundtable Knight
Posts: 2986
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo » Tue Feb 28, 2012 8:43 am

Americans can investigate IRAs, Rollover IRAs, and Roth IRAs. The benefits of deferred taxation are dramatic, if your CAGR is above, say, 10% per year. Profits compound, untaxed, for years and years and years. Speak to your tax professional.

BuyHigh SellLow
Roundtable Fellow
Roundtable Fellow
Posts: 50
Joined: Wed Apr 27, 2011 12:46 pm
Location: U.S.

Post by BuyHigh SellLow » Tue Feb 28, 2012 1:46 pm

If you have mid-six-fig+ income, you can create your own deferred comp plan.

Also SEP IRA contrib limits are high...$49k/year, which is huge.

Aaron01
Roundtable Knight
Roundtable Knight
Posts: 113
Joined: Thu Jun 02, 2011 1:21 pm

Post by Aaron01 » Fri Mar 02, 2012 7:11 pm

Aka77 wrote:As a staunch libertarian of the Rothbardian coterie,I can relate to your issue,which for me carries not only a monetary,but an ethical value as well.
While taxation is a question of morality and ethics, its greatest impact is mathmatical. Simply compute the difference between $1 compounded (once) at 6% annually and that same dollar compounded at 3%.
If you are an American citizen,I suspect your only possibility is to follow the steps of the large fund managers and try to have the bulk of your income taxed as long term capital gains,hoping that the loophole doesn't get closed soon.
This is not really a feasible option for futures traders as we are taxed at a 60/40 (long/short) blended rate regardless of our holding period. Fund managers have the benefit of treating their fees as carried interest.

There currently appears to be a proposal to eliminate the blended rate treatment for derivative traders, but that may be a something of a non-issue. If one assumes the long term capital gains rate will go up in accordance with the POTUS' proposal then the blend would be not be an issue.

Presumably the best outlets for us would be utilizing the various tax free vehicles listed above

Johnedoe
Full Member
Full Member
Posts: 14
Joined: Tue Dec 15, 2009 1:13 am

Re: Avoiding/reducing taxes

Post by Johnedoe » Sat Dec 19, 2015 2:37 pm

Set up a ROTH IRA.
All profits are tax free ....
Down side is, if you haven't got one your starting size is limited, other possibility is convert a traditional IRA to a ROTH. You will take a hit on the initial taxes but you'll be done with them after that.

stamo
Roundtable Knight
Roundtable Knight
Posts: 522
Joined: Tue Mar 13, 2007 5:27 pm

Re: Avoiding/reducing taxes

Post by stamo » Sun Dec 20, 2015 10:21 am

US citizens might consider relocating to Puerto Rico which has its own tax code...

Forbes writes: "Act 22 grants new Puerto Rico residents (including, after a recent amendment, returning Puerto Ricans who left before 2006) a 0% rate on locally sourced interest and dividends as well as all capital gains accrued after they become residents, a particular benefit for active traders. So far 509 tax refugees have been granted Act 22 status and another 600 will get it this year, Puerto Rico’s Department of Economic Development & Commerce projects."

Post Reply