How futures gains and losses are generally taxed under U.S. law — including the 60/40 rule.
Futures contracts you trade through Slay Markets are taxed under Section 1256 of the U.S. Internal Revenue Code, which is different from how stocks, ETFs, and most other investments are taxed. Under the Section 1256 "60/40 rule," 60% of your net annual futures gains or losses are treated as long-term capital gains or losses and 40% as short-term — regardless of how long you held each position. Open positions are marked to market on December 31, and you report your net result on IRS Form 6781, which flows to Schedule D.
This article provides general educational information about the typical tax treatment of futures contracts under U.S. law. It is not tax advice. Slay Markets provides official tax documents (your 1099-B and account statements) but does not provide tax advice. Tax laws are complex and your specific situation may differ. Consult a qualified tax professional or CPA for advice on your personal tax obligations.
What are Section 1256 contracts and do Slay Markets futures qualify?
Regulated futures contracts (and certain foreign currency contracts and options) are classified as "Section 1256 contracts" by the IRS, and this classification applies to the regulated exchange-traded futures you trade through Slay Markets — ES, NQ, CL, GC, and all other regulated exchange-traded futures. Because the futures you trade through Slay Markets are regulated exchange-traded contracts, they qualify as Section 1256 contracts and receive the special tax treatment described below, which differs significantly from how stocks, ETFs, and most other investments are taxed.
What is the Section 1256 60/40 rule for futures taxes?
The most important feature of Section 1256 tax treatment for the regulated futures you trade through Slay Markets is the 60/40 rule, which splits your net annual gain or loss into two capital-gains categories:
60% of your net futures gains or losses are treated as long-term capital gains or losses — regardless of how long you held the position.
40% are treated as short-term capital gains or losses — regardless of how long you held the position.
This blended Section 1256 treatment is typically more favorable than standard short-term capital gains rates, which apply to stocks held for less than one year and are taxed at ordinary income rates.
The Section 1256 60/40 rule applies to your NET annual gain or loss from Section 1256 contracts — not to individual trades. It does not matter whether you held a position for 30 seconds or 30 days. All regulated futures contracts traded through Slay Markets receive this treatment automatically.
How are open futures positions marked to market at year end?
Section 1256 contracts — the regulated futures you trade through Slay Markets — are subject to mark-to-market (MTM) treatment at the end of the tax year (December 31). Under this year-end mark-to-market rule:
Any Section 1256 positions that are still open on December 31 are treated as if they were sold at the closing settlement price on that date.
The resulting gain or loss is included in your taxable income for that year, even though you did not actually close the position.
When you do eventually close the position in the new year, only the gain or loss from January 1 onward is taxable in that year.
This year-end mark-to-market gain or loss is automatically reflected in your 1099-B and your year-end account statement from Slay Markets, so you do not have to calculate it yourself. The 1099-B reports the net Section 1256 result you use to complete your return. For details on what the 1099-B shows, see Your 1099-B and Tax Documents.
Can I carry back a net Section 1256 futures loss?
If you have a net Section 1256 loss for the year from your futures trading through Slay Markets, you have the option to carry back that loss up to three prior tax years to offset previous Section 1256 gains. This carryback election is made on IRS Form 6781 and is not available for other types of investment losses.
Consult a qualified tax professional before making a Section 1256 loss carryback election. Carryback elections are irrevocable once made.
Which tax forms do I use to report futures gains and losses?
Futures gains and losses from your Slay Markets account are reported on IRS Form 6781 and Schedule D. You report your total net gain or loss from Section 1256 contracts on Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles), and the 60/40 split then flows from Form 6781 into your overall capital gains and losses on Schedule D:
Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles) — where you report your total net gain or loss from futures trading for the year.
Schedule D — where the 60/40 split flows from Form 6781 into your overall capital gains and losses.
Your 1099-B from Slay Markets provides the net Section 1256 figure you need to complete Form 6781. The 1099-B reports your year-end mark-to-market net gain or loss; for details on what the form shows, see Your 1099-B and Tax Documents.
What is not covered by Section 1256 tax treatment?
Section 1256 treatment and the 60/40 rule do not apply to every situation, even for futures traded through Slay Markets. The following are not covered by, or may differ from, the standard Section 1256 treatment for regulated futures:
Options on futures may or may not be Section 1256 contracts depending on the specific contract. Confirm with your tax advisor.
Futures in an IRA or other tax-advantaged account — gains and losses in these accounts are generally not reported on Form 6781; different rules apply.
Non-US tax residents — U.S. tax rules may not apply to your futures trading income. Your home country's tax laws govern. Consult a tax professional familiar with cross-border taxation.
Frequently asked questions about futures taxes
Q: Do I pay taxes on every futures trade I make through Slay Markets?
A: No. You pay taxes on your net annual gain or loss from Section 1256 contracts — not on each individual trade. All gains and losses for the year are netted together and reported on Form 6781 at tax time.
Q: Is futures trading taxed better than stock trading?
A: For many traders, yes — because under the Section 1256 60/40 rule, 60% of net futures gains receive long-term capital gains treatment regardless of holding period. With stocks, only positions held longer than one year get long-term treatment. However, tax outcomes depend on your specific situation. Consult a tax professional.
Q: Does Slay Markets withhold taxes from my futures trading account?
A: For U.S. persons, no. Slay Markets does not withhold taxes from futures gains. You are responsible for paying estimated taxes if your annual gain is significant. Consult a tax professional about estimated tax obligations.
Q: How are open futures positions taxed at the end of the year?
A: Section 1256 contracts use year-end mark-to-market. Any position still open on December 31 is treated as if it were sold at that day's closing settlement price, and the resulting gain or loss is included in that year's taxable income even though you did not close the position. When you later close it, only the gain or loss from January 1 onward is taxed in the new year. This is automatically reflected in your 1099-B from Slay Markets.
Q: What is the key takeaway on Slay Markets futures taxes?
A: Regulated futures contracts traded through Slay Markets receive Section 1256 tax treatment — 60% of net annual gains or losses are treated as long-term, 40% as short-term, regardless of holding period. Open positions are marked to market on December 31, and you report the result on IRS Form 6781, which flows to Schedule D. This article is general information; consult a qualified tax professional for advice on your specific situation.
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