How to Save Thousands in Taxes Traders and Investors! | @karltondennis

We’ve got the legendary Carlton Dennis here that’s going to give us a great rundown on how to save thousands of dollars in tax if you are a trader and/or investor. So, Carlton, welcome. Can you give us a quick background? I know we’re on a yacht in the Zumas, but maybe we avoid this beautiful view for the sake of the value in this video. Can you give them a quick background on just how you’ve developed as a professional and who you really helped to serve on an attack side of things?

Yeah, for many people that don’t know my story, I did not go into taxes initially. I did not go to school for accounting. My mother actually owned a tax and accounting firm for the last 30 years, and I happened to intern when I was 16 years old in her office. I went on to play sports, and then after sports was all over, I decided to join the family business and learn that there was a need for tax strategies to be dispersed online. So, what I decided to do is start a YouTube channel. That YouTube channel has since grown to 550,000 subscribers. I’m a licensed enrolled agent now, and I serve business owners and real estate investors across the United States in all 50 states. I love what I do.

That’s awesome.

So, the main thing, there are so many areas of tax and asset protection that you work in. Let’s specifically talk to the investor and trader, and let’s say that they have some capital gains. Maybe we’re talking anywhere between ten thousand dollars up to a couple million dollars in capital gains.

There are a few things that you can do on the tax side specifically, and then we’ll briefly touch on asset protection too. But on the tax side of things, let’s say they have capital gains. They can be in a job or they have their own business. What is an exemption or something that people could take advantage of to help save them thousands of dollars on taxes?

When you’re starting out and investing, you’ll learn that the government only allows for you to claim like $3,000 in losses against your income that you have for capital gains, which, let’s be honest, that’s not enough — $3,000. So, you’ll start to do some research. You might come across this election, and this election is called the mark-to-mark election. Essentially, what it is, it’s saying to the IRS that you’re selling all your securities at the end of the year and claiming it as ordinary income, but you get to experience all of your losses that you might have had throughout the year.

So, as you start to develop as an investor, as a trader, and your account starts getting bigger, you’re going to experience bigger losses. You’re going to use those losses to offset bigger amounts of income, reducing your overall tax bill. That’s what we do. We start looking at the mark-to-mark election, and even more so, Jeff, we’ll start looking at setting up entity structures and treating traders so they can write off like the mark-to-mark that helps them just write off the losses or like what about the commissions and the fees and on each trade, any expense that goes along, what about computer equipment, and stuff like that. So, everything’s under that mark-to-mark.

Yeah, so when they make the mark-to-mark election, it’s pretty much letting the IRS know that I am a trader and now I want to be able to claim some of my expenses for being a trader, which could be my software commission fees, my home office if I want to, and now I can even maybe even write off a vehicle if I’m using a vehicle in the capacity as a business owner. Bitcoin rainbow chart. That’s when we have to start doing some consulting with some of our traders to make sure that they’re leveraging their business the right way.

Okay, so what if they are a business owner, and they have, let’s say, they have a marketing company but their trading account is doing really well. Can they make that exemption as well? Is it an exemption, or is it, yeah, exemption. Can they make that as well if they have active income over a year in their marketing company? Yes, is this treated as an active investment?

It’s only treated as an active investment if they choose to make that election in, and you have to get to a certain dollar amount in your trading account and reach a certain status as a trader even in order to make the mark-to-mark election as a new trader. You can’t make the mark-to-mark election, okay, lead the amount last year in 2022 was about 30,000 in a trading account, but I think that has been thus grown in 2023.

Okay, and the reason why the IRS does that is they just want to protect traders. That’s what they’re trying to do because once you make that election, you can’t unmake the election.

Okay, got it, so that could potentially, instead of someone saving three grand, right, they can now, if they have 500k in losses in a year, they can now have all the 500k instead of the three grand. That’s a hundred percent. Yeah, so that’s massive. Bitcoin rainbow chart.

Yeah, absolutely. Okay, so then on the… This is a question that we get a lot because we have over 1,200 different traders that are in our community, and we have a ton of crypto investors too. So, it’s like how people always ask, should I really be putting this in my own personal name? Like, should I have my investment accounts with whatever broker or offshore exchange that I’m using? Should all that be inside of my own personal name, or what is a good time to put it in an LLC or a C Corp or a trust? First of all, when should we do that, and then secondly, what entity is a good move to move the assets into?

Yeah, when you’re thinking about going into trading, you will start to realize that there’s certain people that are using LLCs versus using their personal names and their own Social Security numbers, and this is something that you will have to decide when you decide to go into trading. Do you want to trade with your own Social Security number, meaning that if something were to happen, you’re liable, anything that you have is liable. Bitcoin rainbow chart. Of something like what, like what’s something that would happen? So, for example, we’ve had certain trading platforms go down, right? Okay, certain people have lost assets or they’ve been…

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Jeff Sekinger

Founder & CEO, Nurp LLC

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