Trading Taxes in the US: How Traders Are Taxed in 2026

How much tax you pay on a trade depends less on the profit than on what you traded and how long you held it. A $10,000 gain on a stock held for three months is taxed as ordinary income. The same gain on a stock held for more than a year, or on a futures contract, can be taxed at lower rates. Add the wash sale rule and the $3,000 loss limit, and two traders with the same result can owe very different amounts.

This guide explains the US federal rules for the 2026 tax year, the returns you file in 2027. It uses the figures the IRS has published for 2026 and the rules in Publication 550. I am a trader, not a US tax adviser, so please read it as an orientation and check your own case with a tax professional. This article follows our editorial policy.

Trading taxes in 30 seconds

• Holding period decides the rate. Gains on positions held one year or less are taxed like wages, at up to 37%. Positions held more than one year get 0%, 15% or 20%.
• Losses first offset gains, then only $3,000 a year. Above that, the net capital loss is carried forward to later years.
• The wash sale rule blocks a loss if you buy back within 30 days. The loss is not gone, it is added to the cost of the new shares.
• Futures and broad index options use the 60/40 rule. Under Section 1256, 60% of the gain counts as long term and 40% as short term, however long you held the contract.
• Trader tax status depends on your activity; the mark-to-market election has its own deadline. Only real traders can elect mark-to-market accounting, and for a calendar-year individual the election for 2027 is due by April 15, 2027.

How is trading income taxed in the US?

In the US, profits from selling stocks, ETFs, options or crypto are usually capital gains. According to IRS Topic 409, a capital gain is the difference between what you receive from a sale and your adjusted basis, which is normally your purchase price including commissions. A sale below the basis creates a capital loss.

The tax is due when you sell, not while you hold. As long as a stock position is open, a price gain is unrealized and is not taxed. That is different for futures and broad index options, which are valued at year end under Section 1256, see below. Your broker reports your sales on Form 1099-B after the year ends.

This guide covers federal income tax only. Many states tax capital gains as well, and a few have no income tax at all. Check your state’s rules separately, because they can add several percentage points to the federal rate.

Short-term vs long-term capital gains

The holding period is the most important number in trading taxes. If you hold a position for one year or less, the gain is short term. If you hold it for more than one year, it is long term. The IRS counts from the day after you bought up to and including the day you sold.

Short-term gains are taxed at your ordinary income tax rate. They are added to your wages and other income and taxed at the normal tax brackets from 10% to 37%. For most active traders, almost all gains are short term, because few day trades or swing trades last a year.

Long-term gains get their own, lower rates. For 2026, Revenue Procedure 2025-32 sets these limits for long-term gains on taxable income, by filing status:

Filing status	0% up to	15% up to
Single	$49,450	$545,500
Married, joint	$98,900	$613,700
Married, separate	$49,450	$306,850
Head of household	$66,200	$579,600

Above the 15% limit, long-term gains are taxed at 20%. A single filer, for example, pays 20% on the part of a long-term gain that pushes taxable income above $545,500.

For short-term gains, the 2026 brackets apply. According to the IRS announcement of October 9, 2025, the tax brackets for single filers are:

Rate on ordinary income (single, 2026)	Taxable income
10%	up to $12,400
12%	over $12,400
22%	over $50,400
24%	over $105,700
32%	over $201,775
35%	over $256,225
37%	over $640,600

Married couples filing jointly have brackets twice as wide up to 35%. The 37% rate starts at $768,700 for them. The standard deduction for 2026 is $16,100 for single filers and $32,200 for joint filers, and it is subtracted before these brackets apply.

The 3.8% net investment income tax

High earners pay an extra 3.8% on investment income. IRS Topic 559 applies this net investment income tax (NIIT) to the smaller of your net investment income and the amount by which your modified adjusted gross income exceeds a threshold.

The thresholds are $200,000 for single filers and $250,000 for joint filers. For married filing separately it is $125,000. Trading gains count as investment income, and according to the IRS this also includes income from a business of trading in financial instruments or commodities. The tax is figured on Form 8960.

For a large winner, the top federal rate is therefore 40.8% on short-term gains. That is 37% plus 3.8%. On long-term gains the top rate is 20% plus 3.8%, so 23.8%.

How capital losses offset gains: the $3,000 limit

Losses first reduce your gains of the same year, without a limit. Short-term losses offset short-term gains first, long-term losses offset long-term gains, and then the two net results are combined. A loss year can therefore wipe out a large gain on another trade.

Only $3,000 of a net loss can reduce your other income. If your capital losses exceed your capital gains, IRS Topic 409 allows you to deduct the lesser of $3,000 ($1,500 if married filing separately) or your net loss against wages and other income. The rest is a capital loss carryover to later years.

A bad trading year can take many years to use up. If you lose $30,000 net and have no gains in the following years, you deduct $3,000 a year for ten years. That is one reason why the mark-to-market election described below can matter for full-time traders.

The wash sale rule: when a loss does not count

A wash sale happens when you sell at a loss and buy the same security back within 30 days. According to IRS Publication 550, the window runs 30 days before and 30 days after the sale, so 61 days in total. In that case you cannot deduct the loss in that year.

The rule also catches indirect purchases. It applies if you buy substantially identical stock, a contract or option to buy it, if you buy it in your IRA or Roth IRA, or if your spouse or a company you control buys it. Two different companies’ shares are normally not substantially identical.

The disallowed loss moves into the new position. Publication 550 gives this example: you buy 100 shares for $1,000, sell them for $750 and buy 100 shares again for $800 within 30 days. The $250 loss is not deductible, but it is added to the new cost, so your basis is $1,050. The holding period of the old shares carries over too.

For active traders, the rule is mainly a timing problem. If you trade the same stock again and again, losses can roll from one position to the next. A loss on shares bought back in your IRA is the exception: Publication 550 does not add it to the IRA basis, so it can be lost for good. Your broker’s Form 1099-B usually only reflects wash sales inside the same account, so trades at other brokers and in your IRA are your job to track; a trading journal helps.

The wash sale rule does not apply to commodity futures and foreign currencies. Publication 550 says this directly. It does apply to losses on contracts and options to buy or sell stock or securities, for example stock options.

Futures and index options: the 60/40 rule (Section 1256)

Regulated futures and broad-based index options are taxed under Section 1256. Publication 550 lists regulated futures contracts, certain foreign currency contracts and nonequity options as Section 1256 contracts. Nonequity options include options on futures and options on a broad-based stock index such as the S&P 500.

60% of the gain or loss counts as long term, 40% as short term. This 60/40 rule applies regardless of how long you held the contract, even for a futures day trade. Options on single stocks, on narrow-based indexes and on ETFs such as SPY are not covered; they follow the normal capital gains rules.

Open contracts are valued on the last business day of the year. If you still hold a Section 1256 contract at year end, you must treat it as sold at its market value and pay tax on the gain. When you later close it, only the change since year end counts. Gains and losses are reported on Form 6781.

The 60/40 split often lowers the tax noticeably. Assume a single filer whose gains fall in the 24% bracket and the 15% long-term rate. A $10,000 short-term stock gain costs $2,400 in federal tax. A $10,000 gain on micro futures costs $6,000 × 15% plus $4,000 × 24%, so $1,860. At the top rates, the blended rate for Section 1256 is 26.8% instead of 37%.

Section 1256 losses can be carried back three years. An individual with a net Section 1256 loss can elect to apply it against Section 1256 gains of the three previous years, starting with the earliest year. The carryback cannot exceed the net Section 1256 gain of that year, and it cannot create or increase a net operating loss there. The loss that qualifies is also not simply your futures loss: Publication 550 caps it at the capital loss you would otherwise carry forward, so work through its definitions before you elect.

Trader tax status and the mark-to-market election

For the IRS, most people who trade are investors, even if they call themselves day traders. According to IRS Topic 429, you are in the business of trading only if you seek to profit from daily price moves, your activity is substantial, and you trade with continuity and regularity. The IRS looks at holding periods, the number and size of trades, whether trading is your livelihood and the time you spend on it.

There is no fixed number of trades that qualifies. The IRS decides on the facts and circumstances, and the label you choose does not matter. Traders can keep long-term positions in a separate account, but they must identify those investment positions on the day they buy them.

Traders with this status can deduct business expenses on Schedule C. That includes costs such as data feeds, software and a trading computer. Commissions are not deducted there; they stay part of the cost or sale price of each trade. Trading gains are not subject to self-employment tax.

The real difference comes with the mark-to-market election under Section 475(f). With a valid election, gains and losses on securities in the trading business become ordinary income and losses, reported on Form 4797. The $3,000 loss limit and the wash sale rule no longer apply to those securities. Ordinary trading losses can then offset wages, but other limits still apply: under the excess business loss rule, business losses above $256,000 ($512,000 for joint returns) in 2026 are not deductible that year and become a carryforward. The 2026 limits come from Revenue Procedure 2025-32; the instructions for Form 461 explain how the rule works.

The price is that long-term rates are gone for those positions. All gains in the trading account are taxed at ordinary rates, and open positions are valued at year end as if sold. The election only pays off if losses or wash sales are a bigger problem for you than the lost long-term rate.

The deadline is strict. Topic 429 requires the election by the due date of the prior year’s return, without extensions. For the 2027 tax year, that is April 15, 2027, with a statement attached to your 2026 return or extension request. You then file Form 3115 for the change in accounting method. Late elections are generally not allowed, and revoking the election also needs a filing.

Crypto taxes for traders

The IRS treats crypto as property, so the capital gains rules apply. Selling bitcoin or swapping one coin for another is a taxable sale, with the same short-term and long-term rates as for stocks. Spending crypto on goods is also a sale. The IRS explains this on its digital assets page.

Brokers now report crypto sales on Form 1099-DA. The form started with sales in 2025. For transactions from January 1, 2026, brokers must also report your cost basis on certain transactions, so the IRS sees both sides of the trade. Every Form 1040 also asks whether you received or sold digital assets during the year.

As of November 11, 2026, the wash sale rule covers only stock or securities, so coins such as bitcoin that are not securities fall outside it. That is how Section 1091 is written, and the IRS treats crypto as property. Tokenized securities are different: the instructions for Form 1099-DA require brokers to report wash sale losses on them. Shares of a spot bitcoin ETF are securities too, so the rule applies to them. Tax law can change, so check the current rules before you plan year-end trades.

Which tax forms traders file

Most of the work starts with the forms your broker sends. Your broker sends Form 1099-B for securities and futures, crypto platforms send Form 1099-DA. The overview below shows where each kind of trade ends up:

What you traded	Main form	Then
Stocks, ETFs, stock options	Form 8949	Schedule D
Crypto (digital assets)	Form 8949	Schedule D
Futures, broad index options (Section 1256)	Form 6781	Schedule D
Securities under a 475(f) election	Form 4797, Part II	Form 1040
Trading business expenses (trader status)	Schedule C	Form 1040
Net investment income tax	Form 8960	Form 1040

Check the 1099 against your own records before you file. Wash sale adjustments, corrected 1099s and transfers between brokers often cause differences in the reported basis. The instructions for Form 8949 explain how to correct a wrong basis with an adjustment code.

Estimated taxes: paying during the year

A good trading year can mean quarterly tax payments. No tax is withheld from trading gains, so the IRS expects estimated tax payments. For 2026, they are due on April 15, June 15 and September 15, 2026, and on January 15, 2027, according to the IRS estimated tax page.

You can avoid an underpayment penalty with a safe harbor. Estimated payments are generally required if you expect to owe at least $1,000 after withholding and credits. Your withholding and payments, made on time in the required installments, must then cover at least 90% of this year’s tax or 100% of last year’s tax. If your adjusted gross income last year was above $150,000 ($75,000 if married filing separately), the prior-year figure rises to 110%.

A large gain late in the year does not have to be spread backwards. According to the IRS, you may be able to annualize your income and pay more for the quarter in which you realized the gain. Raising your withholding from wages is another way to cover the tax, and Publication 505 explains both methods.

Common tax mistakes traders make

Most expensive mistakes are timing mistakes. These come up again and again, and most of them concern the holding period, the 30-day window or a missed deadline:

• Selling a winner a few days too early. At 364 days the gain is short term, at more than one year it is long term. In the 24% bracket, that can be 9 percentage points.
• Buying back after a loss sale in December. A rebuy within 30 days moves the loss into next year, and a rebuy in the IRA can lose it entirely.
• Assuming you have trader tax status. Many people who trade often still count as investors and cannot deduct expenses on Schedule C.
• Missing the April 15 deadline for the 475(f) election. A late election usually means waiting another year.
• Forgetting estimated payments. A large gain in spring can lead to a penalty if you only pay in April of the next year.
• Ignoring state taxes. Federal rates are only part of the bill.

Conclusion: plan taxes before the trade, not after

For traders, tax is a cost like commissions, and it can be planned. The holding period, the instrument and the account decide what you pay. Depending on the rates that apply to you, a futures trader with the 60/40 rule can keep more of the same gain than a stock day trader, and a long-term position more than a short-term one.

For most private traders, three rules matter most. Watch the one-year mark on winners, keep the 30-day window in mind after every loss sale, and set money aside for estimated taxes in good years. Mark-to-market is a tool for real full-time traders, and only with a timely election.

My advice: talk to a tax professional before the year ends, not when you file. Once the year is over, most choices are fixed. This guide is general information on US federal tax for 2026, not tax advice for your situation. For the basics of active trading itself, see our day trading guide and our guide to risk management.

Frequently asked questions about trading taxes

Do I pay taxes on day trading?

Yes, day trading profits are taxable in the year you close the trade. Because day trades last less than a year, the gains are short term and taxed at your ordinary income rate, from 10% to 37% in 2026. Futures day trades are an exception and fall under the 60/40 rule.

How much tax do I pay on trading profits?

It depends on your income, the holding period and the instrument. Short-term gains are taxed at your tax bracket, long-term gains at 0%, 15% or 20%, and high earners pay another 3.8% NIIT. Futures and broad index options are taxed at a blended rate of at most 26.8% before NIIT.

Can trading losses offset my salary?

Only up to $3,000 a year, unless you have a mark-to-market election. Capital losses first offset capital gains without limit, then up to $3,000 of other income such as wages. Traders with a valid Section 475(f) election have ordinary losses, which are not subject to the $3,000 limit, although the excess business loss rule can still limit the deduction against wages.

What is the wash sale rule in simple terms?

If you sell at a loss and buy the same security back within 30 days, you cannot deduct the loss now. The disallowed loss is added to the cost of the new shares and counts when you sell them. The window covers 30 days before and after the sale, and purchases in your IRA or by your spouse count too.

Are futures taxed differently from stocks?

Yes, regulated futures are taxed under the 60/40 rule. Under Section 1256, 60% of the gain is long term and 40% is short term, regardless of the holding period. Open contracts are also valued at year end, and the wash sale rule does not apply to commodity futures.

Does the wash sale rule apply to crypto?

As of November 11, 2026, not to coins such as bitcoin that are not securities. The rule covers stock and securities, and the IRS treats crypto as property. It does apply to tokenized securities and to shares of crypto ETFs, and the law can change, so check the current rules before year end.

How do I qualify for trader tax status?

You must trade substantially, regularly and to profit from daily price moves. The IRS looks at holding periods, the number and size of your trades, the time you spend and whether trading is your livelihood. There is no fixed threshold, and most frequent traders still count as investors.

This article is general information on US federal income tax for the 2026 tax year, based on IRS publications read on November 11, 2026. It is not tax, legal or investment advice. Tax rules change, and your situation may differ; please consult a qualified tax professional.