Tax basics for US futures

This lesson is general education, not tax advice. Tax rules change, and how they apply depends on your own situation. Before you file, talk to a qualified tax professional. Everything below summarizes what the IRS itself publishes in Publication 550 (Investment Income and Expenses, the 2025 edition, for 2025 returns), on its Form 6781 page, and in the instructions printed on Form 6781. If anything here and the IRS disagree, the IRS wins.

Futures have their own tax rules

The IRS calls exchange-traded futures regulated futures contracts, one kind of section 1256 contract. Publication 550 describes a regulated futures contract as one where the money deposited to or withdrawn from your margin account depends on daily market conditions (the mark-to-market you met in Runner Lesson 12), and that trades on, or under the rules of, a qualified exchange, such as a board of trade designated as a contract market by the CFTC.

The 60/40 rule

Publication 550 says that for section 1256 contracts, 60% of a capital gain or loss is treated as long-term and 40% as short-term, and that this is true no matter how long you actually held the position. A trade held for two minutes and one held for two months get the same split.

Year-end mark-to-market

Publication 550 says that a section 1256 contract you still hold at the end of the tax year is generally treated as sold at its fair market value on the last business day of the tax year, and you recognize the gain or loss on that year’s return. When you later close it, that year-end value is taken into account so the same gain or loss is not counted twice. Publication 550 works an example of exactly this.

The forms

• Form 1099-B. Publication 550 says that if you disposed of regulated futures contracts during the year, or held open ones at year end, you should receive Form 1099-B from your broker.
• Form 6781. The IRS says Form 6781 is used to report gains and losses on section 1256 contracts under the mark-to-market rules. Publication 550 says Part I covers contracts open at year end or closed during the year, and the net amount goes to Schedule D (Form 1040). Part I of the form itself does the 60/40 split: 40% of the net amount goes on the short-term line and 60% on the long-term line.
• Loss carryback. Publication 550 describes an election that can let an individual with a net section 1256 contracts loss carry it back 3 years, with limits. This is exactly the kind of choice to make with a tax professional.

Recordkeeping

Keep every Form 1099-B your broker sends, and keep your own trade log (Seat Holder covers journaling). Your log lets you check that the broker’s year-end numbers match what you actually did.

What this lesson does not cover

State taxes, trading through a business entity, prop firm payouts, hedging transactions, and straddles all have their own rules, and Publication 550 treats several of them separately. This lesson does not cover any of them. Ask a tax professional.

Key ideas

• General education, not tax advice. Check with a qualified tax professional.
• Regulated futures are section 1256 contracts to the IRS.
• 60/40: 60% long-term, 40% short-term, however long you held.
• Open positions at year end are generally treated as sold at fair market value on the last business day.
• Expect Form 1099-B; gains and losses go on Form 6781, then Schedule D.