Two investors can make the same trades and keep very different amounts, because the account, the holding period and the instrument set the tax before the market sets the return. The 2026 thresholds, the 60/40 rule for futures, the wash-sale rule and the crypto bill that would extend it, what brokers now report, and the strategy that works for almost everyone.
Nothing on this page is tax advice, and the desk is not a tax adviser; the figures are United States federal rules as the sources state them in October 2026, state taxes are a separate layer, and a person with a real question needs a professional who has seen their return. What the page can do is show the shape of the thing — because the shape is what most traders get wrong, and the mistakes are made before any trade is placed.
The holding period and the 2026 thresholds
A gain on a stock or fund held more than one year is long-term and is taxed at 0%, 15% or 20% depending on taxable income. For tax year 2026 (Revenue Procedure 2025-32) the 0% rate runs up to $49,450 of taxable income for a single filer and $98,900 married filing jointly; the 15% rate runs up to $545,500 single and $613,700 joint; above that, 20%. (The standard deduction is $16,100 single and $32,200 joint, which is why "taxable income" and "income" are different numbers.) A gain on something held a year or less is short-term and is taxed as ordinary income — at the bracket rate, which for a working trader is usually well above 15%.
That one fact does most of the work in long-term investing: the three-fund portfolio is tax-efficient not because of any trick but because it barely sells. A trading account that turns over every week pays the short-term rate on every dollar it makes and gets an ordinary deduction for every dollar it loses, subject to the $3,000-a-year cap on net capital losses against other income. The rebalancing page already said it: rebalance where it is free, and let new money do the work in the account where it is not.
Futures are different: 60/40 and mark-to-market
The contract the desk trades is a regulated futures contract, which the tax code calls a section 1256 contract. Form 6781's instructions give the rule in one sentence: gains and losses "are treated as 60% long term and 40% short term, regardless of how long the contracts were held." A trade held eleven minutes gets the same split as one held eleven months. The same form explains the other half: every contract still open at year end "is treated as if it were sold at fair market value (FMV) on the last business day of the tax year" — mark-to-market, so an open position's paper gain or loss is on this year's return whether or not it has been closed. A net 1256 loss "can elect to carry it back 3 years" against prior 1256 gains, something ordinary capital losses cannot do.
For an active trader the 60/40 split is the single largest structural difference between trading futures and trading stocks, and it is one the desk's own figures never mention: everything on this site is reported before tax, labelled hypothetical, and the after-tax number depends on the reader's bracket. The honest comparison between a futures record and a stock record has to be made after both are taxed, and they are not taxed the same way.
The wash-sale rule, and the bill that would extend it
The SEC's glossary gives the rule: a wash sale "occurs when you sell or trade securities at a loss and within 30 days before or after the sale you" buy substantially identical securities, acquire them in a fully taxable trade, or acquire a contract or option to buy them. The loss is disallowed for that year (it is added to the basis of the replacement shares, so it is deferred rather than destroyed — Publication 550 has the mechanics). A trader who sells a losing stock on the 10th and buys it back on the 20th has not booked the loss.
Two things the rule does not reach today. Section 1256 contracts are marked to market, so there is no loss to wash. And digital assets: the IRS treats virtual currency "as property for federal income tax purposes" (Notice 2014-21), and the wash-sale statute speaks of securities, so under current law a crypto position sold at a loss and bought back the same hour books the loss. That gap is what Congress is moving on. H.R. 10357, the Digital Asset Tax Certainty Act, was approved by the House Ways and Means Committee 38–5 on September 16, 2026; among its provisions, the wash-sale and constructive-sale rules would apply to digital assets. It also carries a $10 de minimis exemption for network fees. As of this page's date it has passed a committee, not Congress; it is not law, and it may not become law. Anyone planning a year around the gap should plan around the bill too.
What the broker now reports about crypto
Since 2025 the reporting regime for crypto has looked like the one for stocks. Under the IRS's final regulations, "brokers must report gross proceeds for transactions effected on or after January 1, 2025" on the new Form 1099-DA, and "brokers must report basis on certain transactions effected on or after January 1, 2026." The IRS FAQ is explicit that a coin-for-coin trade is a taxable event: trade one virtual currency for another and "you will recognize a capital gain or loss." The era in which an exchange statement was the only record is over; the reconciliation problem — basis across wallets and venues — is now the holder's, with the broker's form on the other side of it. The staking page covers the income side: rewards are ordinary income when received, under Revenue Ruling 2023-14.
The account decides first
Put the pieces together and the order of operations is clear. A tax-advantaged account (a 401(k), an IRA, a Roth) does not care about holding periods, wash sales or 60/40 — nothing inside it is taxed until withdrawal, or ever, in the Roth's case — so the trading that would be taxed worst in a brokerage account is taxed least there, with two caveats: not every custodian allows futures or crypto inside one, and a loss inside one is a loss nobody can deduct. A taxable brokerage account is where the long-held index fund belongs, because its gains are the kind the code taxes least. The common mistake runs the other way: the active strategy in the taxable account, where every win is ordinary income, and the index fund in the IRA, where its tax advantage is wasted.
None of this changes what a strategy earns. It changes what the holder keeps, and the difference between the two is decided when the account is opened, not when the trade is placed. The desk reports everything pre-tax and says so; the reader's half of the arithmetic is this page.
- 2026 inflation adjustments, Revenue Procedure 2025-32 — the 0% and 15% capital-gains ceilings and the standard deduction for tax year 2026
- Form 6781, Gains and Losses From Section 1256 Contracts and Straddles (2024) — IRS: the 60/40 rule, mark-to-market, the three-year carryback
- Topic no. 409, Capital gains and losses — IRS: the one-year holding period, the $3,000 net-loss limit, the 0/15/20% rates
- Wash sales — SEC, Investor.gov: the 30-day rule
- Publication 550, Investment Income and Expenses — IRS: the wash-sale mechanics (the disallowed loss joins the basis of the replacement shares)
- Frequently asked questions on virtual currency transactions — IRS: property, Notice 2014-21, coin-for-coin trades are taxable
- Final regulations for reporting by brokers on sales and exchanges of digital assets — IRS: Form 1099-DA, gross proceeds from 2025, basis from 2026
- Ways and Means approves digital assets tax bill — EY, September 2026: H.R. 10357, 38–5 in committee, wash sales extended to digital assets, not law
Education, not advice. Nothing on this page recommends buying or selling anything, and nothing is a promise of results — every figure is cited above or hypothetical. TOTH does not provide investment advice. New to the vocabulary? The glossary has plain definitions.