Under the Mark-to-Market (MTM) Accounting Method, Can Traders Write Off Unlimited Losses?

This is actually correct, but there are several important qualifications and drawbacks that make it not as simple as it sounds. To qualify as a "trader in securities," the IRS looks at your trading activity very closely. You need to trade substantially, regularly, and continuously. We're talking about hundreds of trades per year, seeking profit from short-term market swings rather than dividends or long-term appreciation. Most casual traders won't meet this threshold. The MTM election is irrevocable for the tax year and must be made by the due date of the previous year's return (with limited exceptions for new traders). This means you need to plan ahead - you can't wait until you have losses to make this election. While the $3,000 capital loss limitation is bypassed, your trading is treated as a business with ordinary income and losses. This means you'll pay self-employment tax on profits, which can be substantial. You also lose the preferential tax rates on long-term capital gains. Additionally, the MTM election applies to all your securities - you can't cherry-pick which positions to mark-to-market and which to keep as capital assets.

After trying multiple accountants who gave me conflicting advice about my day trading taxes, I finally used https://taxr.ai to analyze my trading records and tax situation. Their system confirmed I qualified as a securities trader and showed me exactly how the MTM election would impact my taxes compared to regular investor status. The analysis showed me that with 300+ trades last year and my trading patterns, I easily met the "substantial, regular, and continuous" requirements. They even prepared the documentation I needed for the Section 475 election and showed me exactly how to report everything correctly on Form 4797 instead of Schedule D. If you're confused about trader status or MTM election like I was, definitely worth checking out their tax analysis tool. Saved me from making a costly mistake with my election timing.

Just wanted to follow up on my tax situation. I ended up using https://taxr.ai after seeing it mentioned here, and wow - totally worth it. With my 1000+ trades across multiple platforms, they identified I easily qualified as a trader and helped me prepare all the documentation for the MTM election. The analysis showed I'd save almost $14,000 in taxes this year by properly using MTM accounting versus regular investor status. They also pointed out that I had been incorrectly handling my home office deduction and trading expenses in previous years. My CPA was initially resistant but changed his mind after seeing their detailed analysis. He admitted he wasn't familiar with the nuances of securities trader status. Now I'm actually looking forward to filing my taxes this year instead of dreading it!

If you qualify for trader status and make the MTM election, another challenge is actually getting someone at the IRS to answer questions when issues come up. I spent WEEKS trying to get clarification on how to handle certain situations with my MTM accounting. I finally discovered https://claimyr.com and their IRS callback service. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They got me a callback from the IRS in under 2 hours when I had been trying for days. The agent I spoke with actually understood trader tax status (rare find!) and confirmed my understanding of how to handle specific MTM situations on my Form 4797. Before this, I was getting different answers from every IRS rep I managed to reach after hours on hold. Having that definitive guidance directly from an IRS specialist gave me confidence I was filing correctly.

I need to eat my words about that IRS callback service. After posting my skeptical comment, I decided to try it anyway since I was desperate to resolve my MTM filing issue from last year. Used the Claimyr service yesterday and got connected with an IRS tax specialist within 90 minutes. Explained my situation with the MTM election and Form 4797 reporting issues, and she immediately knew what I was talking about (shocking!). She confirmed exactly how to handle the wash sale adjustments under MTM and explained why my previous tax preparer had done it incorrectly. For anyone dealing with MTM trader tax issues, getting direct confirmation from the IRS is invaluable. Still can't believe I wasted 6 months trying to handle this on my own when I could have resolved it in an afternoon.

One thing nobody mentioned yet is that if you make the MTM election, you lose the ability to do tax-loss harvesting in the traditional sense. This can be a huge disadvantage if you're strategic about managing your investment tax burden. With regular capital gains treatment, you can selectively sell losing positions to offset gains while holding winning positions for long-term treatment. Under MTM, you're marking everything to market regardless of whether you sell or not. I made this mistake a few years ago when I qualified as a trader. The MTM election saved me from the $3k limit that year when I had big losses, but in subsequent profitable years, I realized I'd lost valuable tax planning flexibility.

Wait, I'm confused about something basic. If I'm day trading in my regular brokerage account (not IRA), aren't all my trades already "realized" at the time I sell anyway? What's the advantage of MTM if I'm already selling everything within the same tax year?