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Do you pay taxes on trading profits in the US? The basics, in plain English

Yes. In the US, profits from trading are usually taxable, most often as capital gains, and the rate depends on how long you held and what you traded. Here are the general rules, so you know what to record and what to ask a tax professional.

Beginner guide · 8-minute read · Updated 2026-10-21

The short answer

Yes. When you sell something for more than you paid, the gain is usually taxable in the year you sell. Losses can offset gains, with limits.

How much tax depends on what you traded and how long you held it.

Gains only count when you sell

A price going up in your account isn't taxed yet, for stocks, ETFs and crypto. That's an unrealized gain. The tax event is usually the sale.

Futures and some other contracts are different. They're treated as if sold at year-end. More below.

Short-term vs long-term

For stocks, ETFs and most similar assets:

Day trades and most swing trades are short-term. So for most active traders, gains are taxed like regular income.

What about losses?

Losses offset gains. If your losses are bigger than your gains for the year:

• you can usually deduct up to $3,000 of net capital loss against other income ($1,500 if married filing separately),
• the rest carries forward to future years.

The wash sale rule

This one surprises many new traders.

If you sell a stock at a loss and buy the same (or a "substantially identical") stock within 30 days before or after the sale, the loss is disallowed for now. It isn't lost forever. It's added to the cost of the new shares.

Active traders who trade the same stock often can trigger this many times without noticing. Your broker usually tracks wash sales within one account, but not across accounts, so keep your own records.

Futures: the 60/40 rule

Regulated futures, and some other contracts like broad-based index options, fall under Section 1256 of the tax code:

• 60% of the gain or loss is treated as long-term and 40% as short-term, no matter how long you held it.
• Open positions are treated as sold at their market price on the last business day of the year.
• These are reported on Form 6781.

Forex

Spot forex is usually taxed under a different section (Section 988), where gains and losses are generally treated as ordinary income or loss. In some cases a trader can choose a different treatment. Currency futures fall under the futures rules above. This is a good one to ask a professional about.

Crypto

The IRS treats crypto as property. Selling it, trading one coin for another and spending it can all be taxable events. We cover this in crypto taxes in the US.

The forms you'll see

Estimated taxes

If trading gains are a big part of your year and no tax is withheld, you may need to pay estimated taxes during the year, not just in April. A tax professional can tell you if this applies.

"Trader tax status"

The IRS has a special status for people whose trading is substantial, frequent and regular, like a business. It changes how some expenses and losses are treated. The bar is high and the rules are detailed. Most part-time traders don't qualify. Ask a professional before you assume it applies.

Records to keep

Even if your broker sends forms, keep your own:

1. Date and price of every buy and sell.
2. Fees paid.
3. Which account the trade was in (wash sales can cross accounts).
4. Year-end statements from every broker and exchange.

A trading journal helps here too. See how to keep a trading journal.

Where to read more

The IRS explains capital gains in its Topic 409 page and Publication 550 on irs.gov. Then bring your records to a tax professional.

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