ForexVue
Level 9 · Lesson 11 of 16 · 6 min read

Tax Considerations for Forex Traders

You will owe taxes on trading profits. Know the rules before tax season surprises you.

Laurent Researched and written by

The Basics

Trading profits are taxable income in virtually every country. The specific rules vary, but the universal principle is: if you make money trading, you owe taxes on it. Failing to report trading income is tax evasion, which has serious legal consequences.

United States

  • Section 988 (default): Spot forex gains/losses are treated as ordinary income. Losses can offset other income without limit.
  • Section 1256 (election): Forex futures and some forex options get 60/40 treatment: 60% of gains taxed at long-term capital gains rate, 40% at short-term. This can be advantageous for profitable traders in higher tax brackets.
  • Record keeping: Your broker may not send a 1099 for forex. You're responsible for reporting your own gains/losses.

United Kingdom

  • Spread betting: Tax-free for most individuals as of 2026 (no capital gains tax, no stamp duty). This is unique to the UK, and it is a perennial subject of budget speculation, so verify the current rules each tax year.
  • CFD trading: Subject to Capital Gains Tax (CGT). Annual allowance applies.

European Union

Each EU country has different rules. France applies PFU (30% flat tax). Germany has Abgeltungsteuer (25% + surcharge). Italy charges 26% capital gains tax. Always check your specific country's requirements.

Non-negotiable rule: Keep a record of every trade (date, pair, direction, entry, exit, P/L). Your trading journal does this automatically if you maintain it. At tax time, you'll need this data. Consult a tax professional who specializes in trading, not a general accountant.
✅ Check your understanding
In the UK, spread betting profits are:
✅ Check your understanding
You are responsible for keeping records of every trade for tax reporting, even if your broker never sends a summary.

Key Takeaways

  • • US: Section 1256 contracts (60/40 tax) vs Section 988 (ordinary income). Know the difference.
  • • UK: spread betting profits are tax-free as of 2026 (a perennial subject of budget speculation, so verify current rules). CFD profits are subject to capital gains tax.
  • • EU: Tax treatment varies by country. France, Germany, Italy all have different rules.
  • • Keep records of EVERY trade. You will need them. Consult a tax professional who specializes in trading.
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