The universe of futures presents highly leveraged opportunities. However, if you are a trader considering futures trading, you should have a fundamental understanding of the process in which futures are taxed. In this article, we will be covering exactly that.
How are Futures Taxed?
Compared to equity traders, futures traders benefit from a more favorable treatment of taxes. According to section 1256 of the IRC (Internal Revenue Code), any futures contract traded on a U.S exchange, foreign currency contract, dealer equities option, dealer securities futures contract, or non-equity options contract are taxed at 60% long-term capital gains rates and 40% short-term capital gains rates (60/40) - regardless of how long the trade was actually held.