![]() Capital losses can only be claimed against capital gains to lower the taxable amount.If you report your profits as business income, they’re fully taxable.If you report your profits as capital gains, they’re only 50% taxable.What’s the difference?įrom a tax perspective, here’s the difference between reporting your transactions as capital gains or as business income: Collectively, however, this reveals a pattern of activity that’s consistent with either an investment or business intention. On the other hand, a single transaction could be considered business income, especially if it was made in hopes of a quick profit. For example, the fact that you have a high volume of trades won’t mean you’re in business if your long-term intention is to build up your investment portfolio. One or more of these factors on their own won’t necessarily determine how you should report your trading income. If you invest more into penny stocks (inexpensive stocks that are risky because they don’t guarantee a profit), those transactions would probably be considered business income. These can produce dividends, and that might indicate you’re purchasing them as an investment. For example, let’s say you focus mostly on blue chip stocks (stocks that are considered safe and reliable, because they do well even when the economy isn’t great). The type of securities you buy is also important. How much time you spend on the activity.Your knowledge and experience of the stock market and.The duration of your holdings (the usual length of time between when you buy and sell your stocks). ![]() How to decide? Determine your pattern of trading.įactors that determine a trading pattern include: For example, day-traders, who make all their trading transactions within the same day, should report transactions as business income. On the other hand, if you’re buying and selling regularly to make a profit, your transactions should be reported as business income. Generally, if you’re purchasing Canadian securities (such as stocks) as an investment, you should report the transactions as capital gains or losses. Online trading is a great way to build up your investment portfolio and generate some extra income, but you might be wondering if you should be reporting your transactions as business income or as capital gains or losses. If you’re into online trading and watching the market everyday, you’re part of a growing number of Canadians who are managing their own investments.
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