Tax Deduction for Forex Losses?

Can you benefit on your Tax Return at all if your FOREX losses outweigh your winnings?

You can carry your losses to the next year (you keep carrying if you never win) to compensate any gain, but you wouldn't get tax return for capital loss or the government will be in big trouble.

Gotcha, thanks.

By default, they're IRC Section 988 losses and you can put them on your form 1040 and use them to offset any ordinary income.

I'm not sure if carry-forwards of IRC 988 losses are treated the same as IRC 1256 (never had it happen as I always elect 1256). You may want to investigate that futher.

http://www.greencompany.com/Educatio...Currency.shtml


Edit - actually found the answer in that link. katongogo is wrong. Unless you elect out of IRC 988, you can't carry your tax losses forward.

"Section 988 ordinary loss treatment can be a problem if the trader doesn’t have trader tax status (business treatment) and has negative tax income. In that case, the excess forex ordinary losses are wasted and can’t be included in capital loss or business net operating loss carry backs or forwards."

i'm not entirely wrong since i'm only speaking from a personal tax perspective. LOL