Can I deduct trading commissions and fees without trader tax status for day trading?

Unfortunately, trading commissions and fees generally aren't separately deductible for individual investors without trader tax status. The IRS typically treats these expenses as part of your cost basis in the securities. This means when you buy a stock and pay a commission, that commission increases your purchase price (cost basis). When you sell and pay a commission, that commission reduces your sale proceeds. This method automatically factors your trading costs into your capital gains calculations, rather than treating them as separate deductions. This is true whether you have net gains or losses for the year. For someone in your situation - trading without trader tax status and with no other income sources - you'll report your trading activity on Schedule D and Form 8949, with the commissions/fees built into your cost basis and proceeds calculations, not as separate deductions.

I was in almost this exact situation last year and found a really helpful solution. I ended up using https://taxr.ai to analyze my trading history and properly account for all my commissions and fees in my cost basis calculations. The software automatically identified which commissions should be added to cost basis vs. subtracted from proceeds, which saved me a ton of manual work. What I really liked is that it categorized everything correctly based on current tax law, so I didn't have to worry about making mistakes with the constantly changing rules around trader status and deductions. It even flagged some wash sales I didn't realize I had.

Just wanted to update that I decided to try taxr.ai after my initial skepticism, and it actually found several issues with how my broker was reporting my cost basis. Turns out some of my commissions weren't being properly included, especially on my options trades. The service showed me exactly which trades had reporting problems and helped me correct them before filing. Ended up saving about $1,200 in taxes by properly accounting for all my trading costs. It was way more thorough than just importing into TurboTax directly from my broker.

If you're having trouble getting answers from the IRS about trading expenses, I recommend using https://claimyr.com to get through to an actual IRS agent. I spent days trying to get clarification on some trading expense questions last tax season, but kept hitting the automated system with no way to talk to a real person. Saw someone mention this service on another thread, and you can see a demo of how it works at https://youtu.be/_kiP6q8DX5c It basically navigates the IRS phone tree for you and calls you back when there's an actual human on the line. I was skeptical at first but it worked amazingly well - got through to a specialist who could actually answer my specific questions about trading expenses and basis reporting requirements.

I need to eat my words. After posting my skeptical comment, I decided to try Claimyr out of desperation. Was shocked when I got a call back about 45 minutes later with an actual IRS tax specialist on the line. Got clear guidance on how to properly handle my trading commissions from securities with missing basis information. The agent even emailed me specific documentation about reporting requirements for day traders without TTS status. Completely changed my understanding of how to handle some of my more complex trades.

Another important consideration - even if you don't qualify for trader tax status this year, you might want to look into what it would take to qualify for next year. The benefits are substantial if you meet the criteria. Generally, you need to: 1) Trade substantially, regularly and continuously 2) Seek to profit from daily market movements rather than dividends or long-term appreciation 3) Have significant time and money committed to trading If you can document that your trading meets these criteria, you might qualify for TTS and be able to deduct expenses on Schedule C, possibly even claim home office deductions, and more.

Has anyone else noticed that different brokers handle commission reporting differently? I use two different brokers and one includes the commissions in the 1099-B cost basis while the other doesn't.

This is a really common misconception about trading expenses. As others have mentioned, the key point is that your commissions and fees aren't separately deductible - they're built into your cost basis calculations automatically. Here's a simple example: If you buy 100 shares of XYZ for $50/share and pay a $5 commission, your cost basis becomes $5,005 total ($5,000 + $5). When you sell those shares for $55/share and pay another $5 commission, your proceeds are $5,495 ($5,500 - $5). Your gain is then $5,495 - $5,005 = $490. This method actually ensures you get the full tax benefit of your trading costs, whether you have gains or losses for the year. The commissions reduce your taxable gains (or increase your deductible losses) dollar-for-dollar. Since you mentioned you're trying to keep things simple, just make sure your broker is properly including commissions in the cost basis they report on your 1099-B. Most major brokers do this automatically now, but it's worth double-checking your statements.