How to Calculate Futures Trading Taxes on 60/40 Split with Regular Income?

Thanks for the explanation! So since my income is already $65k, I'm beyond the 0% capital gains bracket for the 60% portion of my futures gains? That's a bit disappointing, but still better than having it all taxed as ordinary income I guess. Do I need to be making estimated quarterly tax payments on these futures profits? I've heard something about that but wasn't sure if it applies to me.

Yes, since your regular income already puts you above the 0% capital gains threshold, the 60% portion of your futures profits will be taxed at 15% rather than 0%. It's still advantageous compared to short-term capital gains rates, which would be your ordinary income tax rate. Regarding quarterly estimated tax payments, if you expect to owe more than $1,000 in taxes when you file your return, you generally should make estimated tax payments. This applies to any income not subject to withholding, including futures trading profits. If you don't pay enough throughout the year, you could face an underpayment penalty. You can use Form 1040-ES to calculate and pay your estimated taxes, or adjust your W-4 withholding at your job to cover the additional tax liability.

Does it handle other types of trading too? I've got some futures but also a bunch of options and regular stocks. Would be great to have one tool that handles everything.

I'm skeptical about these tax tools. How accurate is it really? My tax situation is pretty complicated with futures, forex, and some crypto. Last thing I need is to rely on some tool and then get audited because it calculated something wrong.

It absolutely handles other trading types too. The platform covers everything from stocks and options to cryptocurrencies and forex. I was actually surprised at how it properly separated my qualified dividends from non-qualified ones, which my previous tax software kept messing up. As for accuracy, I was initially skeptical too, but it's actually built by tax professionals who specialize in investment taxation. What gave me confidence was how it identified some complex situations like wash sales across different accounts that I had completely missed. After using it last year, I had my regular accountant review everything and he was impressed with how accurate it was, especially with the Section 1256 calculations. The tool also provides a detailed explanation of how each calculation was made, so you can verify the logic yourself or show your tax preparer.

How does this actually work? Do they just call the IRS for you or something? I don't get it.

This sounds like BS to me. I've called the IRS dozens of times and NOBODY gets through in 15 minutes. Also, most IRS agents don't even understand the complexities of futures taxation and Section 1256 contracts. They usually just direct you to the publications or tell you to consult a tax professional.

It's actually pretty straightforward. Claimyr uses technology that navigates the IRS phone tree and waits on hold for you. When they reach an agent, you get a call back to connect with them. They don't call on your behalf - they just handle the waiting part, which is usually hours long. The value of speaking with an IRS agent isn't necessarily for complex tax strategy advice, but for confirming specific requirements like estimated payment obligations, documentation needs, or checking on the status of previously filed returns. You're right that for detailed futures trading tax strategy, a tax professional with experience in securities taxation is often better. But for my specific question about quarterly payment requirements based on my situation, the IRS agent was able to provide the exact guidance I needed, and I didn't have to waste a day on hold to get it.

Wait, futures don't have wash sale rules? So I can literally sell /ES at a loss today and buy it back 1 minute later, and still claim the loss? That seems too good to be true.

That's correct! Section 1256 contracts, which include regulated futures contracts, are exempt from wash sale rules. This is one of the biggest tax advantages of trading futures versus stocks or options on stocks. You can absolutely sell an /ES contract at a loss and immediately repurchase it while still claiming the tax loss. This gives futures traders much more flexibility for tax planning, especially in December when you might want to realize some losses to offset gains elsewhere in your portfolio. Just remember though, this only applies to regulated futures contracts. If you're trading options on individual stocks or ETFs (not broad-based indices), those are still subject to wash sale rules. It's the Section 1256 designation that provides the wash sale exemption along with the favorable 60/40 tax treatment.

Do you have a template for that spreadsheet you could share? I'm terrible at creating these things from scratch but that sounds super helpful.

I don't have a specific template to share, but I can tell you what columns I track in mine: Trade Date, Contract, Entry Price, Exit Price, Quantity, P&L, Running Total P&L, and then I have calculated columns for the 60/40 split (60% Long-term, 40% Short-term). I also track my regular W-2 income YTD so I can estimate my total tax bracket. At the end of each month, I calculate estimated taxes owed on the futures gains and set that money aside in a separate account. The key is updating it regularly rather than scrambling at year-end. Most brokers provide good reporting, but having your own running total helps with tax planning throughout the year, especially for making those quarterly estimated payments.

This is really helpful! I didn't realize that my total taxable income (including the futures gains) determines the capital gains bracket. So even though I'm making $65k at my day job, if I add futures profits on top, I could potentially push myself into a higher bracket for the long-term portion too, right? The mark-to-market rule is something I definitely need to pay attention to. I've been holding some /ES positions for a few weeks now that are currently profitable, so I guess I'll owe taxes on those gains even if I don't close them by December 31st? And yeah, I definitely need to get on those quarterly payments. I've been putting it off but sounds like it's going to bite me if I don't start soon. Thanks for the Form 6781 tip - I'll make sure to ask my broker about their year-end summaries.

Exactly! Your total taxable income determines which bracket you fall into. So if you're making $65k from your job and have significant futures profits, you could potentially push into the 20% long-term capital gains bracket (which starts around $492k for single filers in 2024, so probably not an issue for most of us, but the 15% bracket does have limits too). Yes, on the mark-to-market rule - any open /ES positions you're holding will be marked to market on December 31st regardless of whether you actually close them. So if you have unrealized gains on those positions, you'll owe taxes on them as if you closed them on the last trading day of the year. Then if you continue holding into the new year and eventually close at a different price, you'll have additional gain/loss to report in the following year. For quarterly payments, since we're already in Q4, you might want to calculate what you owe for the full year and make a larger Q4 payment to catch up. The IRS generally wants you to pay either 90% of current year tax liability or 100% of last year's liability (110% if your prior year AGI was over $150k) to avoid underpayment penalties. One more tip: keep track of any commissions and fees from your futures trading - those are deductible against your trading profits and can add up over time, especially if you're actively trading.

This is such valuable insight about the cash flow planning aspect! I hadn't really thought about how the mark-to-market rule could create a situation where I owe taxes on money I haven't actually realized yet. That's definitely something I need to plan for, especially since I tend to hold some positions for weeks or months. The safe harbor rule sounds like a smart approach for the quarterly payments. Since this is my first year with significant trading profits, I'm guessing my total tax liability this year will be much higher than last year, so paying 100% of last year's liability should be the easier path to avoid penalties. Do you have any rules of thumb for how much cash to set aside throughout the year for potential taxes on open positions? I'm thinking maybe I should calculate the potential tax hit on my current unrealized gains each month and make sure I have that amount liquid just in case.