Are futures contracts taxed differently than stocks?

Yes, futures contracts and stocks are taxed differently in the United States. Here's a brief summary:

Futures Contracts:

Tax Classification: Futures are considered "Section 1256 contracts" by the IRS.
Tax Treatment: Profits and losses from these contracts are taxed using the 60/40 rule:
- 60% of the gain or loss is taxed at the long-term capital gains rate, which is generally lower.
- 40% is taxed at the short-term capital gains rate, equivalent to your ordinary income tax rate.
Annual Reporting: At the end of each year, all open futures positions are treated as if they were sold at their market value (known as "mark-to-market"). This means you'll report gains or losses annually, even if you haven't closed the position.

Stocks:

Tax Treatment Based on Holding Period:
- Short-Term: If you sell a stock after holding it for one year or less, any profit is a short-term capital gain, taxed at your ordinary income tax rate.
- Long-Term: If you sell after holding for more than one year, the profit is a long-term capital gain, taxed at a reduced rate.

Key Differences:

Holding Period Impact: Stock taxes depend on how long you hold them, while futures receive favorable tax treatment regardless of the holding period.
Tax Rates: The 60/40 split for futures often results in a lower tax rate compared to the potential higher rates on short-term stock gains.

Important Notes:

Mark-to-Market Rule: At the end of each year, Section 1256 contracts are treated as if they were sold at their fair market value. This means you'll report gains or losses even if you haven't sold the contracts.
Consult a Tax Professional: Tax laws can be complex. It's advisable to seek guidance from a tax advisor to ensure accurate reporting.