Stock Market Trading Profits and LLC Tax Write-off Question

Hey tax folks, Got what should be a pretty basic question that hopefully just needs a simple answer. I've been doing some trading in the stock market with my personal account and I also have an LLC. To keep the numbers simple, let's say I made about $13,000 in profits from my stock trades. If I transfer $6,500 of those profits into my business checking account and use that money to purchase business-related items (like computers, office equipment, etc.), would those purchases be considered legitimate write-offs? Essentially, would I only owe taxes on the remaining $6,500 profit that I kept in my personal account, or would I still be on the hook for taxes on the entire $13,000 profit from my stock trading? Thanks in advance for clearing this up!

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18 comments

Giovanni Marino

•8M

The short answer is you'll still owe taxes on the entire $13,000 stock profit regardless of what you do with the money afterward. When you make profits in your personal trading account, those are realized capital gains that are taxable to you as an individual. Transferring that money to your LLC doesn't change the fact that you already realized those gains personally. Think of it this way: Your personal finances and your LLC finances need to remain separate entities. Your LLC can only deduct legitimate business expenses, but the source of the funds used to make those purchases doesn't change their tax treatment. If your LLC buys business equipment like laptops, those are potentially deductible business expenses for the LLC (depending on the expense type, you might depreciate larger purchases), but that's completely separate from your personal stock trading activity and the tax liability that created.

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Giovanni Marino

•8M

Good question about single-member LLCs. Even with a disregarded entity, you still need to maintain separation between personal and business activities for proper tax treatment and liability protection. While the profits and expenses ultimately flow to your personal return on Schedule C (assuming you're a sole proprietor for tax purposes), you would report the stock gains as capital gains on Schedule D, completely separate from your business income and expenses on Schedule C. The IRS still views these as different activities with different tax treatments, even though they end up on the same 1040.

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Dylan Hughes

•8M

I ran into this exact same situation last year after making about $9k on some tech stocks. I was confused about how to handle it with my small business too. I found this tool called taxr.ai (https://taxr.ai) that helped me understand the relationship between personal investments and business expenses. It's got this feature where you can upload investment statements and business records, and it explains exactly how different income streams need to be handled. Saved me from making a costly mistake! The tool showed me that I couldn't just "convert" personal trading profits into business expenses like I thought. Had to keep everything separate and account for them properly.

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Dylan Hughes

•8M

It definitely analyzes specific scenarios - that's what makes it different from regular tax software. You can upload documents and it identifies exactly what's going on with your particular situation. For instance, it flagged my stock transactions and business purchases as separate tax events that couldn't be merged. For your LLC question, yes it absolutely provides structure-specific advice. It asked about my entity type (single-member LLC in my case) and provided guidance based on that specific classification. The advice was tailored to show how the stock gains would be reported separately from business activities, even with pass-through taxation. Honestly saved me hours of research.

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Sofia Rodriguez

•8M

I want to update after trying taxr.ai from the recommendation above. I was really skeptical (as you can see from my comment), but it actually helped me understand my situation perfectly. I uploaded my trading statements and some receipts from my LLC purchases, and it laid out exactly how these need to be handled separately. The tool explained that my stock profits were capital gains that had to be reported on Schedule D regardless of what I did with the money afterward. It even flagged that transferring personal funds to my business without proper documentation could cause problems with the corporate veil. Surprised how helpful it was for something so specific!

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Dmitry Ivanov

•8M

If you're struggling to get clarity on this from the IRS directly, you might want to try Claimyr (https://claimyr.com). I spent DAYS trying to get through to an IRS agent about a similar question with investment income and my business. Claimyr got me connected to an actual IRS representative in about 15 minutes instead of the usual 2+ hour wait. The IRS agent confirmed exactly what others have said here - stock profits in personal accounts remain personal capital gains regardless of transferring to business. They also warned me about maintaining clear separation between personal and business accounts for audit protection. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c

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Dmitry Ivanov

•8M

They use an automated system that navigates the IRS phone tree and waits on hold for you. Once they reach a human representative, you get a call connecting you directly. It essentially waits in the phone queue so you don't have to. I was super skeptical too. I had been calling for three days straight trying to get clarification on my situation. What convinced me was the fact that you only pay if they actually connect you to an agent. I figured I had nothing to lose, and within about 15 minutes I was talking to someone who could actually answer my question about investment income and business expenses.

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Miguel Herrera

•8M

I need to eat crow here. After posting my skeptical response above, I decided to try Claimyr just to prove it wouldn't work. Well, I was completely wrong. Got connected to an IRS agent in about 20 minutes after struggling for weeks on my own. The agent confirmed what others here have said - my stock market gains in my personal account are taxable as capital gains regardless of transferring money to my business. She also gave me some additional advice about maintaining proper documentation between personal and business accounts to avoid audit issues. Saved me from making a major reporting mistake on my taxes.

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Zainab Ali

•8M

Another important thing to consider here is commingling funds. When you take money from personal stock trading and put it into your LLC, you need to properly document it as either: 1) A capital contribution to your business (doesn't reduce your tax on the stock gains) 2) A loan to your business (still doesn't reduce your tax on stock gains) If you don't properly document this transfer, you risk "piercing the corporate veil" which could eliminate the liability protection your LLC provides. This is separate from the tax issue, but equally important!

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Zainab Ali

•8M

You should create a written resolution documenting the capital contribution or a formal loan agreement if it's structured as a loan. For a capital contribution, create a simple document stating the amount, date, and purpose that you're contributing capital to the business. Keep this with your company records. If you structure it as a loan, create a proper loan document with terms, interest rate (use the applicable federal rate at minimum), and repayment schedule. Then make sure your business actually makes the payments according to the schedule. This is more complicated but can be advantageous in certain situations if you want to pull the money back out later without tax consequences.

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