How Futures Are Taxed in the US: Section 1256, the 60/40 Rule, and Form 6781

In the United States, most futures traded on a regulated exchange are Section 1256 contracts, and they are taxed under a special regime: 60% of any gain or loss is treated as long-term and 40% as short-term, no matter how long you held the position. Open positions are also treated as if you sold them at the end of every tax year, so you can owe tax on profits you have not yet taken.

In short: US futures gains are taxed with a 60/40 blend of long-term and short-term capital gains rates, which caps the top federal rate at 26.8% (before the 3.8% net investment income tax). Every open contract is marked to market on the last business day of the year. You report it all on IRS Form 6781, and individuals can elect to carry a net Section 1256 loss back three years against earlier Section 1256 gains.

This guide covers federal rules for the 2026 tax year, as of November 2026, and cites the Internal Revenue Code, IRS Publication 550, and the Instructions for Form 6781 by name. States add their own tax.

What counts as a Section 1256 contract

Section 1256 of the Internal Revenue Code lists five kinds of contract. IRS Publication 550 (Investment Income and Expenses) and Form 6781 use the same list:

Type	What it covers in practice
Regulated futures contract	Futures traded on a qualified board or exchange where margin moves daily with the market. This is nearly every CME Group, Cboe Futures, or ICE US futures contract a retail trader touches.
Foreign currency contract	Certain interbank currency forwards that meet the statute’s tests.
Nonequity option	Listed options that are not options on a single stock. This includes options on futures and options on broad-based stock indexes such as the S&P 500.
Dealer equity option	Equity options, but only in the hands of a registered options dealer.
Dealer securities futures contract	Security futures, but only in the hands of a dealer.

A few things are not Section 1256 contracts for an ordinary investor:

Security futures (futures on a single stock or a narrow index), unless you are a dealer. They follow the ordinary stock rules. US trading in these products has been minimal since OneChicago closed in 2020.
Options on individual stocks and on ETFs, which are equity options.
Certain swaps, which the statute specifically excludes.

If you are not sure what a regulated futures contract is mechanically, start with what a futures contract is.

The 60/40 rule

Under Section 1256(a)(3), any capital gain or loss on a Section 1256 contract is treated as:

60% long-term capital gain or loss, and
40% short-term capital gain or loss.

Holding period does not matter. A position held for ninety seconds and a position held for nine months get the same split. Compare that with stocks, where a gain on shares held one year or less is entirely short-term and taxed like wages.

What that does to the top rate

Long-term gains are taxed at 0%, 15%, or 20%. Short-term gains are taxed at ordinary rates up to 37%. For someone in the top brackets for 2026, the blended federal rate on a futures gain is:

0.60 × 20% + 0.40 × 37% = 12% + 14.8% = 26.8%

Add the 3.8% net investment income tax (NIIT) if your modified adjusted gross income is above $200,000 single or $250,000 married filing jointly, and the top blended rate becomes 30.6%. A short-term stock gain at the top bracket would face 37% + 3.8% = 40.8%.

The 2026 thresholds below come from IRS Revenue Procedure 2025-32, which set inflation-adjusted figures for the 2026 tax year.

Single filer, 2026 taxable income	Long-term rate
up to $49,450	0%
$49,451 to $545,500	15%
over $545,500	20%

For single filers, the ordinary brackets run from 10% (up to $12,400) to 37% (over $640,600). Your 40% short-term slice is taxed at whatever ordinary rate applies to your income.

Year-end mark-to-market

The second half of the regime is in Section 1256(a)(1): every Section 1256 contract you hold at the end of the tax year is treated as sold at its fair market value on the last business day of the year. In practice that value is the exchange’s settlement price for that day.

This mirrors how futures already work. Your broker moves cash in and out of your account every day as positions are marked to market. The tax code simply takes a snapshot at year end.

Two consequences follow:

You can owe tax on an open position. If you are up on a contract at the December 31 settlement, that gain is taxable for the year even though you have not closed the trade.
Next year starts from the marked price. Your basis resets to the year-end value, so you do not pay twice. Any further move after January 1 belongs to the next tax year.

Worked example: a position held across year end

All prices are illustrative. On December 1, 2026, a trader buys 2 E-mini S&P 500 futures (contract value $50 × the index) at 6,000.00. The December 31 settlement is 6,050.00. She closes both contracts on January 15, 2027 at 6,020.00.

2026 (marked at year end): (6,050.00 - 6,000.00) × $50 × 2 = $5,000 gain, taxable in 2026 even though the trade is still open.
2027 (closed in January): (6,020.00 - 6,050.00) × $50 × 2 = $3,000 loss, measured from the marked price.
Total over both years: $5,000 - $3,000 = $2,000, which is the real economic result: (6,020.00 - 6,000.00) × $50 × 2.

The tax total is correct, but the timing is not what most stock investors expect. A large open profit at year end can produce a tax bill that arrives before the trade is finished.

How it is reported: Form 1099-B and Form 6781

Futures brokers (futures commission merchants) do not usually send a trade-by-trade list like a stock broker does. Form 1099-B has dedicated boxes for regulated futures, foreign currency contracts, and Section 1256 options:

Box 8: profit or loss realized in the year on closed contracts,
Box 9: unrealized profit or loss on open contracts at the end of the prior year,
Box 10: unrealized profit or loss on open contracts at the end of this year,
Box 11: the aggregate profit or loss, which is what normally flows to your return.

You report that aggregate on Form 6781, Gains and Losses From Section 1256 Contracts and Straddles:

Part I is for Section 1256 contracts. You enter the net gain or loss, the form splits it 60/40, and the two pieces go to Schedule D as long-term and short-term.
Part II covers straddles (offsetting positions), which have their own loss deferral rules under Section 1092.
Part III covers unrecognized gains on positions held at year end, in certain cases.

From Schedule D, the totals move to Form 1040 with the rest of your capital gains.

Worked example: a typical year

A single filer has $120,000 of taxable income in 2026 before trading. Her futures account shows a net Section 1256 gain of $20,000 in box 11 of her 1099-B.

Split the gain:

60% long-term: $20,000 × 0.60 = $12,000
40% short-term: $20,000 × 0.40 = $8,000

Short-term slice: her ordinary income becomes $120,000 + $8,000 = $128,000, which sits in the 24% bracket ($105,701 to $201,775). Tax: $8,000 × 24% = $1,920.

Long-term slice: total taxable income is $140,000, well inside the 15% band. Tax: $12,000 × 15% = $1,800.

Federal tax on the futures gain: $1,920 + $1,800 = $3,720, an effective rate of 18.6%.

If the same $20,000 had been a short-term stock gain, all of it would have been taxed at 24%, for $4,800. The 60/40 rule saves her $1,080 here. Her income is under the $200,000 NIIT threshold, so no NIIT applies.

Losses and the three-year carryback election

Section 1256 losses go through the same capital loss machinery as other losses. They offset capital gains first, and an individual can then deduct up to $3,000 of net capital loss against other income each year ($1,500 married filing separately). The rest carries forward.

Futures traders get one extra option. Under Section 1212(c) of the Code, an individual with a net Section 1256 contracts loss for the year can elect to carry it back three years. The Instructions for Form 6781 describe how it works:

Who can elect: individuals. The instructions state that corporations, estates, and trusts are not eligible.
How: check box D at the top of Form 6781 for the loss year and enter the amount to carry back. Then file an amended return (Form 1040-X) or Form 1045 for each earlier year, with an amended Form 6781 and Schedule D.
Order: the loss goes to the earliest of the three years first, then the next.
Limit: in each earlier year, the carryback cannot be more than that year’s net Section 1256 gain, and it cannot create or increase a net operating loss. It only offsets Section 1256 gains, not wages or stock gains.
Character: the carried-back amount keeps the 60/40 split in the year it lands.
Leftover: anything that cannot be absorbed carries forward.

Worked example: carrying a loss back

All figures are illustrative. A trader has a net Section 1256 loss of $30,000 in 2026. His net Section 1256 gains in earlier years were $10,000 in 2023, nothing in 2024, and $15,000 in 2025, and his overall capital gains in those years were at least that large.

2023 first: $10,000 of the loss is absorbed, wiping out that year’s net Section 1256 gain.
2024: no Section 1256 gain, so nothing is absorbed.
2025: $15,000 is absorbed.
Left over: $30,000 - $10,000 - $15,000 = $5,000, which carries forward.

He gets refunds of tax already paid in 2023 and 2025. The carryback is an election, so it is worth comparing against simply carrying the whole loss forward. The Form 6781 instructions walk through the exact limits line by line.

Hedgers are different

Section 1256(e) carves out hedging transactions. A farmer selling corn futures against a growing crop, or an airline buying heating oil futures against fuel purchases, is not speculating, and the hedging gain or loss is ordinary income or loss. It is not marked to market and not split 60/40. The catch is identification: under the hedging regulations, the business generally has to identify the position as a hedge in its records before the close of the day it enters the trade. A position that is not properly identified can be stuck with the regular Section 1256 treatment, which does not line up with the ordinary income on the crop or fuel.

Other rules worth knowing

Wash sales. The wash-sale rule disallows losses when you rebuy “stock or securities” within 30 days. Regulated futures are marked to market every year, so the wash-sale rule generally does not come into play for them. Single-stock futures and stock options are different.
Straddles. If you hold offsetting positions, such as a long futures contract against a short position in a related asset, Section 1092 can defer your losses. Part II of Form 6781 is where this shows up. Spread trades can create straddles.
Trader status. Some full-time traders elect mark-to-market accounting under Section 475(f), which turns gains and losses into ordinary income. For futures, that gives up the 60/40 blend, so read the rules carefully before electing anything.
Futures ETFs. A commodity ETF structured as a partnership passes Section 1256 results through to you on a Schedule K-1. Other ETF structures are taxed differently. The fund’s tax documents say which applies.
Estimated tax. Because gains are taxed when marked, a big year can mean you owe quarterly estimated payments to avoid an underpayment penalty.

What can go wrong

Forgetting open positions. Year-end marking catches unrealized gains. Plan for the tax before December 31, not in April.
Assuming a short holding period means a high rate. It does not for Section 1256 contracts. It does for single-stock futures, which are not Section 1256 contracts for non-dealers.
Mixing up products. Options on SPY (an ETF) are equity options. Options on the S&P 500 index and options on E-mini futures are Section 1256 contracts. Same market exposure, different tax treatment.
Missing the carryback. The election is made by checking box D on Form 6781 for the loss year. If you skip it, you are left with the normal forward carry.
Hedge identification. A business hedger who does not identify the hedge on the day of the trade can get a mismatch between ordinary income on the business side and capital treatment on the futures side.
Ignoring state tax. Most states tax capital gains as ordinary income, so the 60/40 split saves nothing at the state level.
Using last year’s brackets. Thresholds change every year. Check the IRS revenue procedure for the year you are filing.

The short version

Regulated futures in the US are Section 1256 contracts. Gains and losses are split 60% long-term and 40% short-term regardless of holding period, which puts the top federal rate at 26.8% before the 3.8% NIIT. Every open contract is treated as sold at the year-end settlement price, so you pay tax on open profits. Your broker reports an aggregate number on Form 1099-B, and you carry it to Form 6781 and Schedule D. Individuals with a net Section 1256 loss can elect to carry it back three years against earlier Section 1256 gains. Identified business hedges get ordinary treatment instead. For how the same trades are taxed north of the border, see how futures are taxed in Canada.

This is general education, not tax or legal advice. Tax rules depend on your circumstances and change every year. For decisions about your own return, consult a qualified tax professional or the IRS directly.