How are futures gains taxed for a Hawaiʻi resident?
For federal taxes, regulated futures are section 1256 contracts. Under the 60/40 rule, 60 percent of your gain or loss counts as long-term and 40 percent as short-term, no matter how long you held the trade. Open positions are treated as sold at their market value on the last business day of the year. Hawaiʻi residents also pay Hawaiʻi income tax, and Hawaiʻi law caps the state rate on net capital gains at 7.25 percent. Talk to a tax professional about your own return.
What is the 60/40 rule?
The IRS treats 60 percent of a section 1256 gain or loss as long-term and 40 percent as short-term. This is true even for a trade you held for five minutes.
Made-up example: a $1,000 net gain for the year is treated as $600 long-term and $400 short-term. Long-term gains usually have a lower federal rate than short-term gains. The gains and losses go on IRS Form 6781.
What does marked to market mean for taxes?
If you still hold a futures position at the end of the year, the IRS treats it as sold at its fair market value on the last business day of the year.
You report that gain or loss for this year. When you close the trade next year, you count only the change after year end.
Does Hawaiʻi follow the federal rule?
Hawaiʻi's income tax law adopts most of the federal tax code. Hawaiʻi Revised Statutes 235-2.3 lists the federal sections that do not apply in Hawaiʻi, and section 1256 was not on that list when we checked on 2026-10-15.
Hawaiʻi Revised Statutes 235-51(f) caps the state tax on net capital gains at 7.25 percent. Net capital gain has a specific tax meaning. How the federal split and the state cap work together on your return depends on your whole tax picture. That is a question for a tax professional.
Are prop firm payouts taxed the same way?
Maybe not. A payout from a prop firm's funded account is paid by the firm. It is not a gain from futures trades in your own account. Ask a tax professional how to report it.
Common mistakes
- Assuming all futures day trades are taxed as short-term gains.
- Forgetting open positions on the last business day of the year.
- Treating prop firm payouts like futures gains without asking a tax professional.
Sources
- IRS Publication 550 (section 1256 contracts, 60/40 rule)
- IRS: About Form 6781
- Hawaiʻi Revised Statutes 235-51 (tax rates, capital gains)
- Hawaiʻi Revised Statutes 235-2.3 (federal sections that do not apply)
- Hawaiʻi Department of Taxation
Last reviewed: 2026-10-16
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Risk disclaimer: Education only. Not financial advice. Trading futures involves substantial risk of loss. This page is general tax education, not tax advice. Tax law changes. Talk to a tax professional about your own situation. Futures are not suitable for every investor, and you can lose more than your initial deposit. Examples on this page use made-up numbers to teach the math. Past performance does not guarantee future results. Hawaiʻi Trading Academy provides education only. We are not financial advisors, and nothing on this page is a recommendation to buy or sell any financial product. HTA is not affiliated with CME Group or any exchange or agency named here. Times, rules and dates can change; check the source before you trade.
