Romeo,
posts by tsch and dgcfx
whether you are considered a professional trader (taxed as income) or a retired person engaged in trading (taxed as capital gain) is the issue. What the IRS would consider you I couldn't say. But my understanding is, there is great advantage to have it treated as capital gain according to one opinion I have seen; spot forex gains are treated like gains on futures contracts that are marked to the market every day. This would mean that 60% of the gains are taxed at the long term rate which is currently under 20%, and 40% as regular short term gains, regardless how long the currencies were held. Probably much better than all of it taxed as income, plus 15% soc security tax on top.
Of course as a professional trader you can deduct business expenses.
source below...
http://www2.oanda.com/cgi-bin/msgboard/ ... 917#000000