Should I apply for trader tax status as a crypto day trader in 2025?

Thanks for the info! I trade daily and make between 20-50 trades a week. Would that qualify as "substantial" trading? And is there any specific form I need to file to "apply" for TTS or do I just start filing as if I have it?

Trading 20-50 times per week would likely meet the "substantial" trading requirement, especially if you're doing this consistently throughout the year. There's actually no formal application process for TTS - it's a tax status you claim by filing your taxes as a business (Schedule C) rather than as an investor. Just be aware that if you're audited, the IRS will look at your specific trading patterns to determine if you truly qualify. Make sure you keep detailed records of all your trades, time spent trading, and maintain separate accounts for your trading business. Consistency in your trading activity is key to supporting your TTS claim.

Does the tool tell you what expenses you can claim if you do qualify? I've heard home office and computer equipment can be written off, but I'm not sure what documentation I need to keep.

I'm skeptical about these tax tools. How does it handle the mark-to-market election that goes with trader status? That's a separate thing you need to file by April 15th the previous year, right? So isn't it already too late for 2025?

Yes, it provides a complete breakdown of potential deductions specific to crypto trading businesses. You can deduct home office (if you have dedicated space), equipment, software subscriptions, research tools, and even educational materials about trading. They recommend keeping receipts for everything and documenting how each expense relates to your trading business. The tool does address mark-to-market elections and explains the timing requirements clearly. You're partially right - MTM elections need to be made by the tax filing deadline (including extensions) for the previous year. But TTS itself can be claimed without MTM. The tool helps distinguish between these two separate concepts, which many traders confuse. It's not too late for claiming TTS for 2025, though the MTM election deadline would indeed be different.

Wait, how does this actually work? The IRS never calls anyone back... Do you have to give them your personal info? Sounds kind of sketchy to be honest.

I don't buy it. I've tried everything to get through to the IRS about my crypto tax questions and nothing works. How would some random service get priority access to the IRS phone lines when they're completely jammed?

It works by holding your place in line on the IRS phone system. You provide the same information you'd give when calling the IRS yourself (like what department you need and basic verification info). It's not giving you priority access - it's literally just waiting on hold for you, then calling you when an agent picks up. They don't get any special access - they're using automation to wait through the hold times on your behalf. The service just dials the IRS and navigates the phone tree for you, then stays on hold (sometimes for hours) until an agent answers. When that happens, it connects you directly to that agent. I was skeptical too, but after spending over 6 hours trying to get through myself across multiple days, this was absolutely worth it.

I definitely spend more than 4 hours daily on my trading and analysis. Some days it's literally my entire day. Does monitoring the markets and researching trades count toward that time requirement, or just the actual execution of trades?

Yes, time spent on market research, analysis, and strategy development all counts toward your trading activity time - it's not just about the moments you click "buy" or "sell." Keep a log of your daily activities to document this time commitment. Research is considered part of your trading business as long as it directly relates to your actual trading decisions. This is especially important for crypto traders claiming TTS, as the IRS may scrutinize these claims more closely since it's a newer asset class than traditional securities.

What's the threshold for having to make quarterly payments? Is it a certain dollar amount or percentage of your expected tax bill?

Generally, you need to make quarterly estimated payments if you expect to owe $1,000 or more in tax when you file your return. The safe harbor rule is that you need to pay either 90% of the current year's tax liability OR 100% of last year's tax liability (110% if your prior year AGI was over $150,000). Since crypto trading profits can be unpredictable, I'd recommend using the annualized income installment method if your trading income varies significantly quarter to quarter. This lets you base each quarterly payment on your actual income for that period rather than estimating the full year upfront. The self-employment tax component makes this especially important for traders since that's an additional 15.3% on top of regular income tax rates.

This is really helpful, thanks for the detailed breakdown! I'm curious about the record-keeping aspect you mentioned. What specific documentation did your CPA recommend for tracking daily trading time? I've been keeping trade logs but haven't been documenting my research and analysis time. Also, when you mention "separate accounts for trading vs. investment activities" - does this mean I need completely different exchange accounts, or can I just maintain separate records showing which trades were for business vs. investment purposes? I have some crypto that I'm holding long-term alongside my day trading activities.