Is a self-employment investment LLC legit for deducting my trading expenses?

This is a bit of a gray area in tax law. The key distinction is whether your investment activities rise to the level of being considered a "trade or business" rather than just personal investing. Simply forming an LLC doesn't automatically make your investment activities deductible. What matters is the nature, extent, and frequency of your activities. If you're actively trading securities in a substantial, continuous, and regular manner (like a day trader), the IRS might consider this a trade or business, allowing those expenses to be deductible on Schedule C. However, if you're more of a passive investor who buys and holds investments for appreciation and income, putting this in an LLC won't magically make those expenses deductible. The IRS looks at substance over form - the actual nature of what you're doing rather than just the legal structure. I'd strongly suggest consulting with a tax professional who specializes in this area before proceeding, as an incorrect determination could lead to an audit.

I was in the same boat as you last year and started using taxr.ai (https://taxr.ai) to help with my LLC investment tax situation. Their AI analyzed my investment activity patterns and gave me clarity on what qualifies as deductible vs non-deductible. It saved me from making a costly mistake. What's cool is you can upload your trading records and get an analysis of whether your trading activity might qualify as a "trade or business" based on transaction frequency, holding periods, and time commitment. It also helped me document everything properly to support my position if I ever get audited.

Update on my experience with taxr.ai - I decided to try it despite my initial skepticism. Honestly pretty impressed. After uploading my trading data, it showed me that while I thought I was trading enough to qualify as a "business," my pattern was actually more consistent with investing (longer hold times, not enough frequency). The report saved me from a potential audit nightmare since I was planning to deduct about $14,000 in expenses. Instead, it helped me identify which portion of my activities might qualify for trader tax status and restructure things. Now I'm adjusting my trading patterns for 2025 based on their recommendations to better establish my case for business treatment. Worth the time for sure.

I spent 4 months trying to get clear answers from the IRS about this exact issue. Kept getting different answers every time I called. Finally used Claimyr (https://claimyr.com) to get through to a senior IRS agent who actually specialized in business classifications. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that the LLC itself doesn't change anything - it's all about trading frequency, intent, and how you conduct the activity. She walked me through the specific factors they look for when determining trader vs investor status. Saved me from a potentially expensive mistake.

I need to eat my words. After reading about Claimyr here, I tried it myself because I had another tax question that had been hanging over me for months. Got connected to an IRS agent in less than an hour after trying unsuccessfully for weeks on my own. The agent walked me through exactly how they evaluate investment LLCs and trader tax status. She said they look for: (1) seeking profit from daily market movements rather than dividends/appreciation, (2) substantial activity - usually hundreds of trades annually, (3) regular and continuous activity throughout the year. She also mentioned they're increasing scrutiny of investment LLCs claiming business expenses, so documentation is super important. Definitely worth the call to get official guidance.

I've been trading through an LLC for the past 3 years. Here's my experience: 1. Just having an LLC doesn't magically make expenses deductible - I had to demonstrate I was truly operating as a business 2. I make 15-20 trades per week consistently throughout the year 3. I maintain a separate home office exclusively for trading 4. I keep regular "business hours" for my trading activities 5. I document EVERYTHING - time spent researching, analysis methods, trading strategies My accountant says the key is treating it like a legitimate business in every way. I got audited in 2023 and successfully defended my deductions because I had meticulous records showing this wasn't just casual investing.

Something nobody's mentioned yet - you need to consider making a Section 475(f) mark-to-market election if you're serious about this. This election treats your securities as ordinary income/loss rather than capital gains/losses and is often considered evidence that you're operating as a business trader. The deadline is April 15 of the tax year (or March 15 for existing LLCs taxed as corporations). Missing this deadline can complicate your case for trader status.