Booyah Breakdown: Taxes for Traders

Editor's note: As a special feature for March, TheStreet.com offers an ongoing series on everything you need to know about taxes.Today is Part 2.

While Cramer typically says that you shouldn't let taxes influence your trading decisions, he's not excusing you from filing a tax return.

And while that process can be almost as mind-boggling as Tuesday's market fall, it is a necessary evil. The good news is if you happen to make a living as a trader, you may qualify for some very cool tax perks.

But first you must determine if you really are a trader in the eyes of Uncle Sam. You may feel like one because you're constantly glued to the ticker on your computer, but unless you meet the IRS' stringent guidelines to qualify for "trader status," you're considered an "investor" in their eyes.

So this week's Booyah Breakdown will help you determine just where you stand.

Are You a Trader or an Investor?

It's an important distinction. The IRS considers investing to be a kind of hobby. But trading is a business, eligible for greater tax breaks and a 100% deduction of legitimate business expenses. Plus, a trader has the option of using trading losses to offset an unlimited amount of income.

Daytrading was the cool new thing to do during the tech boom -- but individuals who consider it their profession have been around for years. And until the Taxpayers' Relief Act of 1997, the tax code never acknowledged them.