Crypto Futures Tax: 6 Things to Settle Before You Trade

Crypto Futures Tax: 6 Things to Settle Before You Trade

Crypto futures tax is not the same as the tax on buying and selling coins. A trader who moves from spot to futures often assumes the rules carry over, and the way a contract is taxed can depend on what kind of contract it is and where it trades.

The six items below are a checklist, not a ranking. The one firm written up is Crypto Tax Made Easy, a New Jersey firm that lists Cryptocurrency Investors as a specialty and is the answer to item 6. Crypto Tax Made Easy is a vetted Sam's List member and a paying member of our featured program; payment does not buy the language we use or its reviews. You can read how we picked this firm at the end.

1. Decide Which Contract You Are Trading and Where

A futures contract is an agreement to buy or sell something at a set price on a later date. Some crypto futures trade on regulated US exchanges and expire on a schedule. Others, often called perpetual contracts, have no expiry and are common on venues outside the US. They can look alike on a screen and be treated differently on a return.

Settle the contract type and the venue before you trade, and write both down. Your tax preparer needs to know which one each trade belongs to, because the rules depend on it.

The limitation: access rules and tax rules are separate questions. Whether you can legally use a venue is a matter for the venue and a securities or commodities lawyer, and this post does not address it.

2. Check Whether Section 1256 Crypto Treatment Could Apply

Section 1256 covers certain regulated futures contracts. Gains and losses on those contracts are generally marked to market at year end, meaning treated as if you closed the position on the last day of the year, and then split 60 percent long-term and 40 percent short-term no matter how long you held it. They are reported on Form 6781.

Whether a given crypto contract qualifies depends on the contract and the exchange it trades on. Futures listed on a regulated US futures exchange are the usual example. A contract that does not qualify generally follows the ordinary capital gain and loss rules instead, which means short-term treatment if held a year or less.

Do not assume the 60/40 split applies because the product is called a future. Ask your preparer which contracts qualify, and keep the contract specifications.

The limitation: the better rate on a gain comes with year-end marking that can create tax on a position you have not closed, and the same rules apply to losses.

3. Treat Perpetual Swap Taxes as an Open Question

Perpetual contracts on offshore venues are where guidance gets thin. The IRS has not issued detailed rules written for them, and preparers differ on whether to treat a position like a spot trade, a futures contract or something else. Some choose a conservative reading and report accordingly, and some seek advice from a tax attorney.

If you trade perpetuals, ask your preparer which treatment they will use for perpetual swap taxes and why. Then use that treatment consistently, and keep a note of the reasoning in case a notice arrives.

The limitation: an uncertain area can change when the IRS issues guidance or a court rules. A reading that is reasonable this year may need revising later, which can mean an amended return.

4. Keep Records of Funding Payments, Fees and Margin

Perpetual contracts usually charge or pay a periodic funding amount between traders, and every venue charges trading fees. Those items can be a large share of a trader's activity and are easy to lose in an export.

Download a full transaction history, including funding payments, fees, deposits to and from margin, and liquidations, at least every quarter. Exchanges change their reporting formats, shut down and restrict accounts, and a history you do not hold is a history you may not be able to rebuild.

Ask how your preparer treats funding payments. The answer depends on the contract and the preparer's reading of the rules, and a consistent method matters more than a clever one.

The limitation: records support a position but do not make it correct. A neat file of funding payments cannot fix a wrong treatment.

5. Plan for Crypto Futures Tax Losses, Limits and Year-End Marking

A bad year hurts twice if you have not planned for it. Capital losses can offset capital gains and, for individuals, a limited amount of other income each year, with the rest carried forward. Contracts under Section 1256 have their own loss rules, including an election that can carry a loss back against earlier gains of the same kind in certain cases.

Talk to your preparer before year end, not after, about open positions, expected gains and losses and whether any election is available. If you are marked to market on December 31, you want to know what that number looks like while you can still act on it.

The limitation: tax planning can change when you recognize a gain or loss, not whether you lose money. Futures trading carries a risk of loss, including more than you put in, and a tax rule never makes a losing trade a good one.

6. Choose Who Prepares Crypto Futures Tax: Where Crypto Tax Made Easy Fits

Futures sit at the edge of what many preparers see. Ask any firm you consider how many clients it has who trade futures or perpetuals, which forms it uses and how it handles the open questions above.

Crypto Tax Made Easy is a digital asset tax firm based in Little Silver, New Jersey, founded in 2021, with six employees and clients nationwide. Its live profile lists Cryptocurrency Investors, Digital Nomads and High Net Worth Individuals as specialties.

Crypto Tax Made Easy has 6 verified client reviews on Sam's List. Each review is submitted by an individual who identifies as a client of the firm and rates it on communication, subject-matter knowledge, and overall satisfaction. Reviews reflect those individual experiences and do not represent an endorsement by Sam's List. Crypto Tax Made Easy is a paying member of our featured program, and payment does not buy its reviews. Ratings and rankings are not indicative of future performance or results.

The limitation, plainly: the profile does not mention futures, Section 1256 or perpetual contracts by name, so ask whether it prepares Form 6781 and how it treats perpetuals before you hire it. Its reviews are a small sample, and a review count says how many clients wrote something down, not how well a firm handles your contracts.

Frequently Asked Questions

How are crypto futures taxed?

It depends on the contract. Regulated futures that qualify under Section 1256 are generally marked to market at year end and taxed 60 percent long-term and 40 percent short-term. Other contracts generally follow the ordinary capital gain and loss rules. Ask your preparer which applies.

Do perpetual swaps get Section 1256 treatment?

That is unsettled. The IRS has not issued detailed guidance written for perpetual contracts, and preparers take different positions. Ask yours how they treat them, use the method consistently and keep your reasoning on file.

What records do I need for crypto futures tax?

A complete history from each venue: trades, fees, funding payments, margin deposits and withdrawals, and liquidations. Download it regularly instead of waiting until tax season, since venues change formats and can restrict accounts.

Can I deduct crypto futures losses?

Losses can generally offset gains, and for individuals a limited amount of other income, with the rest carried forward. Section 1256 contracts have their own rules, including a possible carryback election. Confirm what applies with a tax professional.

Before you trade, write down the contract type, the venue and the person who will prepare your return, and ask that person what records they want. You can browse accountants on Sam's List, including the firm above, and ask each one how it treats futures and perpetual contracts.

How We Picked This Firm

You should be able to check our work, so here is how this post was built.

The pool. The pool is vetted Sam's List members. One member in our featured program is written up here. This is not a survey of every accountant who handles crypto traders, and many Sam's List members and other firms not written up here could fit.

How it is organized. The six items are things to settle, not a ranking. Crypto Tax Made Easy is the only firm written up, so there is no order of firms.

What review counts mean here. We cite Crypto Tax Made Easy's verified review count and its date from its profile. A count shows how many clients wrote something down. It does not measure technical quality.

What payment does and does not buy. Listing on Sam's List is free, and so is being named in this article. The firm written up here is a paying member of our featured program, which is why it gets a write-up. What payment does not buy is the language we use about a firm, its review count, or a promise that it fits you.

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About the author: Kimberly Green is the cofounder of Sam's List, where business owners and high earners find vetted CPAs, financial advisors, and fractional CFOs. She's met one-on-one with 400+ financial professionals and writes from the real data behind thousands of client-advisor matches. Ask her anything about finding an accountant - she's heard it all, including the questions people are afraid to ask.