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Curious if any of you have or might eventually set up a retirement account as a trader to reduce your tax liability. I did a little research and found this article about the subject:
https://greentradertax.com/trader-tax-center/retirement-solutions/
Sounds like the best option to set up an S Corp to contribute to a solo 401k. This would require you to pay self employment tax so it might only make sense if you're in the 22% or higher federal bracket and live in a high income tax state. Any other considerations come to mind?
I don't think you could use the same kind of margin setup. For example, portfolio margin doesn't work in retirement accounts. To overcome the tax drag, I simply lever up the options by 1/(1-taxrate). But yes, it would be nice to generate the interest/dividend income tax-free or at least tax-deferred in an IRA.
Even though I run my options account under the umbrella of an LP, I never considered doing the tax hack of a Solo 401k. I live in a tax-free state (WA).
I think there is a very real problem of having too big an IRA/401k. With small pension and SS, I calculate at best equal taxes after RMDs start.
Seems like random comment, but lessens the need or desire for solo-401k.
I can sell /ES puts in my IRA w/ TOS (TD Ameritrade). Is there an advantage to using an LP or S corp instead of just using /ES in my IRA?
Thanks for the replies. Sorry, I probably wasn't clear with my question. I was referring to setting up an S corp with my after tax account portfolio so I can be eligible for retirement contributions like a solo 401k. I might look for part time work in the near future which will put me in a higher tax bracket so I'm looking for ways to lower my tax liability. I'm just trying to figure out if having to pay self employment taxes is worth being able to contribute to a solo 401k. I'll talk to my cpa also to get his suggestions.
As for options trading through an IRA account, I recently requested approval for options trading with Vanguard so I might eventually start selling 1 SPX contract on there. I have the VTSAX equivalent of about the underlying of 1 SPX in my IRA so I'll be essentially doing a covered put/call.
@fi4wanderlust Interesting tax angling with the 401k. Keep us posted on what the CPA says regarding self employment tax vs. benefits to 401k.
I like /ES in my retirement account because I can use leverage similar to how ERN described in his articles. They require full margin on my SPX trades in the retirement account.