Navigating Mark to Market Election/Trader Tax Status for 2025 Tax Year

The Mark to Market (MTM) and Trader Tax Status (TTS) questions can definitely be confusing! Let me try to clear things up: 1. Yes, MTM and TTS are different but related concepts. Trader Tax Status is a tax status you must qualify for based on your trading activity (frequency, volume, holding periods, etc.). The MTM election is a specific accounting method that traders can choose. While you don't absolutely need a CPA, I strongly recommend it for your first year making these elections since the process has specific requirements and deadlines. 2. Good news - you can indeed keep your long-term investments separate! You'll need to clearly identify which accounts are for trading (subject to MTM) and which are for investment when you make the election. This separation needs to be documented properly with the IRS. 3. Unfortunately, wash sale losses from 2024 can't be reclaimed in 2025 even with MTM election. The MTM election only applies going forward from when you make it. Those 2024 wash sale losses are subject to the rules in effect for that tax year. Your visa status shouldn't impact your ability to make these elections, but your trading pattern will be scrutinized to determine if you qualify for TTS.

I went through this exact situation last year! After spending hours researching and getting nowhere, I finally discovered taxr.ai (https://taxr.ai) which helped me figure out if I qualified for trader tax status. You upload your trading records and answer a few questions, and it analyzes everything to determine if you meet the requirements for TTS. The best part was getting clarity on the Section 475(f) MTM election process. They provided a template for the election statement I needed to file and explained exactly how to segregate my trading vs. investment accounts. They even helped me document my trading as a business activity rather than just investments. I was also trading while on a work visa and was worried about complications, but it turned out not to be an issue at all for making these elections.

Just wanted to share an update after using taxr.ai for my situation. I was initially skeptical because I wasn't sure if my 18-22 trades per month would qualify me for trader status, but I decided to give it a try. The analysis they provided was incredibly detailed. Turns out I was actually making enough trades and spending enough hours on my trading to potentially qualify, but I needed to make some adjustments to my trading patterns to strengthen my case. They identified specific areas where my trading activity needed improvement to better support a TTS claim. What really helped was their guidance on preparing the MTM election statement. They provided a template that specifically addressed how to handle segregating my employment-related stock holdings from my trading activity. The peace of mind from knowing I was doing everything correctly was worth it.

If you're struggling to get through to the IRS with questions about trader status or MTM elections, you might want to try Claimyr (https://claimyr.com). I spent weeks trying to get through to the IRS to ask about some specifics on my MTM election documentation and kept hitting dead ends. Claimyr got me connected to an actual IRS agent in under 45 minutes when I had been trying for days on my own. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I needed clarification on how to properly identify my trading accounts versus my long-term investment accounts in my MTM election statement, and the agent was able to give me the specific guidance I needed. Saved me from potentially making a huge mistake on my election statement that could have invalidated my MTM election altogether.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was desperate to get some clarity on the MTM election timing requirements. I was shocked when I got a call back in about 35 minutes saying they had an IRS agent on the line ready to speak with me. The agent confirmed that for making the MTM election for 2025, I needed to file the statement with my 2024 return (which was exactly what I was confused about). The agent also explained that I needed to be very explicit about which accounts were subject to the MTM election and which were being kept as investment accounts. Getting this information directly from the IRS gave me much more confidence than just reading contradictory information online. Really wish I had known about this service earlier in the tax season!

One thing nobody has mentioned yet - if you're making an MTM election, you need to consider state tax implications too. Some states don't recognize MTM or treat it differently than federal. Also, make sure your brokerage can provide the reporting you need. When I made the election, I had to switch brokers because my original one couldn't properly report positions for an MTM trader.

Just a word of caution - make sure you REALLY qualify for trader tax status before making the MTM election. The IRS has been increasingly scrutinizing these claims. The requirements are pretty strict - you need to be trading substantially, regularly, and continuously. From what you described (15-20 trades monthly), you might be on the borderline. The IRS typically looks for: - Trading almost daily - At least 3-4 trades per day when you do trade - Holding periods of less than 30 days for most positions - Significant time spent (15+ hours weekly) on trading activities

This is really helpful information! I'm in a similar situation - been actively trading since early 2024 and dealing with the wash sale headache. One thing I want to add based on my research: even if you don't qualify for full TTS, you might still be able to deduct some trading-related expenses as miscellaneous itemized deductions (though these are currently suspended until 2025 under TCJA). Things like trading software subscriptions, market data feeds, and trading education could potentially be deductible once that suspension lifts. Also, @aef192fb4d37, since you mentioned being on a work visa - make sure to check if your visa status allows you to engage in trading as a business activity. Most work visas permit investment activities, but if you're claiming TTS, you're essentially saying trading is your business, which could potentially create complications depending on your specific visa type. The consensus here seems to be that professional help is worth it for the first year, especially given the complexity and potential audit risks. Better to get it right from the start than deal with problems later!

Welcome to the community, @48259063b1fa! Great questions about documentation requirements. For MTM election documentation, you'll want to maintain detailed records beyond just trade confirmations. The IRS expects to see evidence that you're treating trading as a business, which includes: - Trading journals showing your analysis and decision-making process - Time logs documenting hours spent on market research and trading activities - Records of your trading strategy and any changes to it - Documentation of your workspace/office setup for trading - Evidence of continuous and regular trading patterns Regarding educational expenses - yes, trading courses, books, software subscriptions, and even market data feeds could potentially qualify as business deductions if you achieve TTS. Keep all receipts! However, remember these miscellaneous itemized deductions are currently suspended through 2025 under the Tax Cuts and Jobs Act. The key is demonstrating that your trading activities constitute a trade or business rather than just investment activity. The more professional and business-like your approach appears, the stronger your case for TTS. Since you're new to this, I'd echo what others have said about getting professional help for your first year making these elections. The upfront cost of a qualified tax professional is usually much less than the potential cost of getting it wrong and facing IRS challenges later. Good luck with your trading and tax planning!