When you qualify as a day trader who is in the business of selling securities (also called “trader tax status,” or TTS) rather than as an investor, you can elect to use mark-to-market accounting for your trading business.
This is purely optional, but it is usually a good idea because it can provide many tax benefits, particularly in a down market.
Ordinary Income and Loss Treatment
When you elect mark-to-market accounting, gains and losses from your trading activity are treated as ordinary income and loss, not capital gain or loss. You are not subject to the $3,000 annual limit on deducting capital losses from taxable income that applies to investors and those traders who don’t make a mark-to-market election.
This is particularly important if you lose money from day trading, as many traders do when first starting out. With mark-to-market accounting, you may deduct your trading losses from all types of income (wage, portfolio income, and capital gain) on a joint return or single filing.
There is an annual limit on deducting excess business losses—$313,000 in 2025 (double that if filing jointly). Any losses you can’t deduct become a ... Log in to view full article.
