by Hass67

Forex trading lets you profit from the financial markets no matter what happens to stock markets. Stock markets can go up and down but you can always profit from forex markets.

Inflation goes up, you can profit from forex trading. Inflation goes down, you can profit from forex trading. Similarly, interest rates can go up or down, you will profit from forex trading.

For any investment in financial markets, you have to pay a capital gain tax. It can be a short term capital gain tax in case you take profit from a security within one year, taxed at your current tax rate.

And in case, you hold the security for more than one year before you take profit, you will have to pay long term capital gain tax, taxed at a rate of 15% only.

But if you invest in forex markets, 60% of your profits will be taxed as long term capital gains and only 40% will be taxed as short term capital gains whether you hold a currency for one minute, one hour, and one month or more.

Lets take an example. Suppose you invest $10,000 in stocks and $10,000 in forex. Your tax bracket is 33%. Suppose you made a profit of $10,000 in both stocks and forex each in six months.

Since, you are in 33% tax bracket and you took profit within six months on stocks, your profits will be taxed as short term capital gain. That means you will have to pay $3,300 as tax and your profit after taxes will be only $6,700.

In case of forex, it doesnt matter whether you took profit in six months or one year, 60% of your profit will be treated as long term capital gain and 40% will be treated as short term capital gains. That means 60% of $10,000 will be taxed at only 15% which is (0.6) (10,000) (0.15) =$900.

40% of your profits in forex will be taxed as short term capital gains at your current rate of 33%. It calculates to (0.4) (10,000) (0.33) = $1,320.

So the total tax that you pay on your forex investment will be ($900) + ($1,320) =$2,220. But your tax on stock investment was $3,300 which is $1100 more than the tax on the same capital gain on your forex investment.

Tax savings like that can add up quickly. You can also accumulate profits quickly by investing in the Forex market within your IRA or other tax-deferred retirement account.

About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading; stocks and forex. Learn Penny Stock trading. Read about Trend Forex System. Best Forex Signal Service.

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