How should I report income made from day trading?
Income from day trading is usually reported as business income rather than capital gains.
While there’s no legal definition of “day trading” for income tax purposes, here are some general indicators of a day-trading business:
Frequency- extensive buying and selling and/or quick turnover
Knowledge of or experience in the markets
The activity is a part of "business as usual"
Substantial time spent studying and investigating the markets
Significant purchases financed on margin
Networking to publicize the willingness to purchase
Speculative activity
Example:
Alice regularly buys and sells various publicly traded stocks. Alice:
Monitors fluctuations in value with a view toward profit
Had many transactions on most of business days during the year
Had activities consistent with that of day trading.
In 2024, Alice sold $2,400,000 worth of various stocks, originally purchased for $2,000,000.
Her gross profit was $400,000.
Since Alice was actively and often trading in stocks, she'll report net business income of $400,000 on her 2024 income tax return (assuming she had no other business expenses).
For more information, see Day Trading in Canada.
