Tax deductions for Traders

[KJ]

It would be interesting to put together a list of deductions that TRADERS can legally claim against income.

Apart from interest if one works from home I think that you can claim a % of house expenses such as rates,electricity,depn on house,& telephone,R & M.

Of course there will be stationery,computer costs,publications, and interest on borrowed money.
What others are there?

[Steve]

If you have a seperate room set aside as an office you may claim an office area/total house area = %cost deduction.

Don't forget house/contents insurance.

Other expenses you could claim are:

-training costs, for example if you were to study the Technical Analysis paper by distance through the Securities Institute of Australia (Good paper, although I found that they were after inflexible answers out of the book when I was looking beyond the book by being more dynamic in my approach to the answers)

-travel costs if you were to attend AGMs etc. Whether this be a km's basis for local travel, or airfares for inter-city travel. NOTE:that you probably need to be of a reasonable 'size' to justify bigger travel costs eg:if you only had $3k in a company, it might look a bit strange if you fly AKL-CHC for an AGM - I'm unsure what the IRD position in such an example would be

Hows that for a start?

[Lawso]

Brokerage

[KJ]

Steve-agree.I also think that I read somewhere that if you have a room set aside you can apply the same % (say 10%) to mortgage interest on your home if you have a mortgage.

[whiteheron]

If you are a "trader " you must return for tax purposes all income derived from your trading activities from whatever source and you are entitled to all deductions that a business can claim , that is expenses directly incurred in the production of assessable income

Such expenses would include ( but not to the exclusion of others );

Rent , or a depreciation allowance for the use of a room at home if you have one set aside exclusively for your share trading activities --- there is a formula laid down for this based on the proportion that the area of this room bears to the area of your house , based on the value thereof ( government valuation of the building I think )

Cost of internet connection and services

Power , telephone , insurance , newspapers etc , based on a reasonable aportionment basis

Printing , postage , stationary and other miscellaneous expenses directly related to share trading

Investment magazines and material

Attending investment courses and seminars (and maybe AGMs if you have significant holdings in the company )

Depreciation on equipment eg computer and office equipment such as fax machine and office furniture etc

Brokerage and other similar costs

Professional investment advice such as subscription to an investment service or newsletter

Any other expenses directly incurred in carrying
out share trading

I think that it would be pushing it to claim for things such motor vehicle depreciation and running costs unless you were trading big time , earning heaps and were actually using the vehicle for your business activities

Claim what is reasonable and you will probably be okay , but claim excessively and you may have a fight on your hands with much explaining to do to the IRD

Note that this only applies to trading activities and not to long term investments

[KJ]

WH-Do you agree with a portion of mortgage interest?

[whiteheron]

KJ

I knew that I would have missed something

Yes , I believe that is a legitimate deduction , based on the same apportionment as the house depreciation

Sorry about that ---I have no doubt that there are others that have been missed as well

[Cooper]

quote:Originally posted by KJ

Steve-agree.I also think that I read somewhere that if you have a room set aside you can apply the same % (say 10%) to mortgage interest on your home if you have a mortgage.

I was advised that 10% of housing costs (rent/mortgage) was about right.

[Steve]

Did we mention the cost of an Accountant to ensure we claim all that we are entitled to, as well as making sure that we get it right?

[whiteheron]

Steve

I purposely left out accountancy fees on the basis that I was responding to do it yourselfers and not those who employ an accountant ( who presumably would know what can and cant be claimed and would claim accordingly )

I have an accounting background but dont profess to know every twist and turn on this subject so I would like to hear from anyone who doesnt agree with what I have said or who can add to it