All traders have them, those pesky trading expenses. One of the most important aspects of running your own trading business is properly tracking your trading expenses from month to month. Recall the objective in running a trading business is to ensure that every expense you have involved in your trading business can be used to offset any gains you have in profitable trading, thus reducing your taxable income. Unlike the 99% of retail traders who must eat daily expenses like internet hookups, commissions, option contract fees and a host of other expenses, you use every one of them to offset your other income.
To properly track your recurring expenses from month to month, like internet service, cell phones bills etc., you will need to set up a system that you can rely on from month to month to quickly see what your expenses are, document that properly for your annual tax return for your CPA and provide good feedback for you so you can properly evaluate any holes in your bucket. If you’re like me you want to keep every cent of your hard-earned trading profits.
One of the easiest ways I’ve found is to have either a credit or debit card attached to your trading business account. Most online brokers that you use today have a bank they work with, or they are a financial institution themselves. By applying for a card attached directly to your trading account you can easily pay all bills related to trading through that account. By consolidating all of your expenses into one account a record will be maintained throughout the year for accounting purposes.
Often these cards can be tied into your accounting software like QuickBooks, so it automatically imports each month all your expenses. At year end when you provide your CPA online access to your account to file your taxes, everything is right there for her neatly categorized. This system is so easy it makes doing taxes a breeze, not a bother like most traders endure at year end.
Keeping an easily maintained method as described for tracking your trading expenses leads me to a monthly time spent on these mundane tasks to under 10 minutes a month. Give it a try, you will be glad you did!
Enuf said.