Forex trading has become more and more popular these past few years all over the entire world, especially among Canadian people. There are many forex brokers taking on board Canadian traders, helping them make a profit and increasing their income through investments.
The issue is that just like any other type of income, trading profits are also taxed. What does this mean for Canada and the people making this kind of investment? Well, we are just about to find out.
Why Do Forex Traders Get Taxed?
Forex trading generates a certain amount of income every year – and according to the Government of Canada, each income bracket is subjected to a specific tax rate. No matter what you earn or lose, you need to report it to the government and make the appropriate payments.
Forex trading deals with almost every currency in the world. As a result, the government sees it fit that it should be taxed as well. Profits from currency fluctuations also have the potential to be very high. The government sees it, and as a result, will turn it into a revenue opportunity for the state.
How Are Taxes Applied?
When you start trading, you won’t be taxed for it right away. You can still try everything out, without the government breathing down your neck. For your first $200 in profits and losses, you will be left alone.
Once you have more than $200 in yearly gains, the tax will be for about 50% of your marginal rate. That means half of your marginal rate will be taxed by 43%. The marginal rate may differ in various circumstances, so make sure that you check with the government laws.
Tax Tips for Canadian Traders
If you are new to foreign exchange, here are some strategies that may come in handy:
1. Understand Forex Trading
The better you understand foreign trading, the easier it will be able to find a strategy. Find out which currency is the weakest and use it to increase your profits. The more you earn, the more you will also be able to earn (as counterproductive as that may sound).
2. Seek Guidance
Sometimes, it pays to have a tax professional give you advice on how to calculate your taxes. They know all about the tax brackets, as well as the potential deductions that you may get. Employ their help to generate more income by the end of the fiscal year.
3. File Your Taxes on Time
The problem with taxes is that they need to be paid by a specific deadline. Bear in mind that trading in Canada and the U.S. are two different things – which means tax deadlines may also be different. To make sure you are not penalized, you should make those payments on time.
The Bottom Line
As citizens, none of us are spared from having to pay taxes. This is what keeps our country running. If you have begun making a profit from forex trading, make sure that you pay your taxes on time, using the correct amounts.
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