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Taxes comes with the paid plan ($20 a month).
Examples and ideas, not tax advice: confirm with a CPA before you file. Futures in a personal brokerage account already get one of the best tax deals in trading; the main levers are good records and lowering your taxable income through your day job.
60/40 rule. NQ futures are Section 1256 contracts. However short the trade, 60% of your net gain is taxed at the long-term capital gains rate and 40% at your normal rate. A stock day trader pays the normal rate on everything.
No self-employment tax. Gains from trading your own money aren't self-employment income, unlike prop payouts.
Simple reporting. Your futures broker sends a 1099-B with one net number. It goes on Form 6781.
Year-end rule. A position still open on December 31 is taxed as if you closed it that day.
Use a losing year. If a year ends with a net futures loss, you can choose to carry it back up to 3 years against earlier futures gains and get a refund. Otherwise losses offset other gains, plus up to $3,000 a year of regular income, and the rest carries forward.
Put more into your 401(k) at work. Trading gains don't count as earned income, so they can't fund an IRA by themselves. Your W-2 pay can. Raising your 401(k) contribution lowers the income taxed alongside your trading gains.
Pay estimated taxes on big gains. Or raise your withholding at work, so you don't owe a penalty in April.
Don't count on deducting expenses. Charting, data and courses are only deductible with trader tax status, which needs trading to be close to a full-time business. With a full-time job that's hard to prove.
| Prop payouts | Personal brokerage account | |
|---|---|---|
| Taxed as | Self-employment income (1099-NEC) | 60/40 capital gains (1099-B) |
| Self-employment tax | Yes, about 15.3% | No |
| Expense write-offs | Usually yes (eval fees, data, platform) | Usually no |
| Retirement plan from it | Solo 401(k) or SEP IRA | No, use your work 401(k) |
Nasdaq: Section 1256 contracts, what they are and how to report
Schwab: Tax strategies for traders
Traders Second Brain: Are prop firm fees tax deductible?
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Self-reported journal. Nothing here is financial advice.