- ES, NQ and their micro versions (MES, MNQ) are typically Section 1256 contracts — CME-listed regulated futures receiving the automatic 60% long-term / 40% short-term split regardless of how briefly a position was held.
- The micro contract is a size difference, not a tax difference. MNQ is generally taxed exactly as NQ is, and MES as ES. Trading micros to manage risk does not change the treatment.
- For most traders the blended federal ceiling lands near 26.8% instead of up to 37% on short-term gains, reported on Form 6781 rather than trade-by-trade on Schedule D.
- Single stock futures are generally excluded from §1256 for non-dealer traders — a securities futures contract on one company is not the same animal as an index future, despite both being called futures.
- A funded-account payout is different again. Trade NQ inside an Apex or TopStep account and the payout is typically ordinary income, not 60/40 — the instrument does not decide, the account ownership does.
- Open positions are generally marked to market at year-end, and §1256 losses can typically be carried back three years. Every situation varies — a trader-specialist CPA can confirm what applies.
Equity index futures are the most-traded instruments in retail futures, and the tax question that actually comes up is rarely "how does §1256 work" — it is narrower and more practical. Does the micro contract get the same deal? Is a single-stock future the same thing? And what happens when the account is a prop firm's rather than mine?
This page answers those. The broad mechanics live on futures trading taxes, and there is a short recap below so this page stands alone.
Do ES, NQ, MES and MNQ qualify as Section 1256 contracts?
Generally yes. Section 1256 covers regulated futures contracts traded on a qualified board of trade, and the E-mini and Micro E-mini equity index contracts are listed on CME, a US-regulated exchange. That is what puts them inside §1256 and gives them the 60/40 split without any election.
| Contract | Underlying | Exchange | Standard or micro | Typical §1256? |
|---|---|---|---|---|
| ES | E-mini S&P 500 | CME | Standard E-mini | Yes |
| MES | Micro E-mini S&P 500 | CME | Micro | Yes |
| NQ | E-mini Nasdaq-100 | CME | Standard E-mini | Yes |
| MNQ | Micro E-mini Nasdaq-100 | CME | Micro | Yes |
| Single stock futures | One company's shares | varies | — | Generally excluded for non-dealers |
The last row is the one worth reading twice. Securities futures contracts on a single name are generally excluded from §1256 for a non-dealer trader, so they typically do not receive 60/40 even though the word "futures" appears in the name. CME began listing single-name contracts in 2026, which makes this a live distinction rather than a historical footnote.
Broad-based index options — SPX, NDX, RUT — are also typically §1256 contracts, while options on individual stocks and on ETFs such as SPY generally are not. A trader choosing between SPX and SPY options for the same exposure is making a tax decision as well as a liquidity one. Detail on options trading taxes.
Is MNQ taxed differently from NQ? Is MES different from ES?
Generally no. This is the single most common instrument-level tax question and the answer is refreshingly simple: the micro contracts are smaller versions of the same instrument on the same exchange, and they typically receive the same §1256 treatment. A trader who scales down from NQ to MNQ to manage risk is not changing their tax position, only their position size.
What the micro does change is the number of transactions, and that has a practical rather than a rate consequence. Ten MNQ contracts instead of one NQ is ten fills instead of one, and traders who scale in and out across micros generate far more line items. Because §1256 activity is generally reported as an aggregate figure on Form 6781 rather than trade-by-trade, this is less painful than the equity equivalent — but the broker's 1099-B still has to reconcile against your own records, and a year of heavy micro scalping is a large reconciliation.
Not the rate — the year-end mark. A trader holding open MNQ positions on December 31 typically has a deemed sale at that day's close, producing gain or loss in that year even though nothing was closed. Traders running small size across many contracts often carry positions through the boundary without registering that each one is marked. That is the mechanical trap on this family of contracts.
What about RTY, M2K, YM and MYM?
Same analysis, same answer. The four index contracts traders ask about least are treated exactly like the two they ask about most, and for a reason that has nothing to do with the index itself.
| Contract | Tracks | Listed on | §1256 treatment |
|---|---|---|---|
| RTY | Russell 2000 | CME | Yes — 60/40 |
| M2K | Russell 2000 (micro) | CME | Yes — 60/40 |
| YM | Dow Jones Industrial Average | CBOT | Yes — 60/40 |
| MYM | Dow (micro) | CBOT | Yes — 60/40 |
§1256 does not ask which index a contract tracks. It asks whether the contract trades on, or is subject to the rules of, a qualified board or exchange under §1256(g)(7), and whether it is margined on a system of marking to market. CME and CBOT are both CFTC-designated contract markets, so a contract listed on either clears the venue prong whatever it references — the Russell, the Dow, the S&P or the Nasdaq.
The same point about micros applies here as it does to MES and MNQ: M2K and MYM are a size difference, not a tax difference. A smaller notional changes how much gain or loss you produce, not how it is characterised. And as with every contract on this page, all of them are marked to market automatically at year end by operation of law, which is not the §475 election and does not need to be elected.
If you trade several of these, that is still one Form 6781 line of analysis rather than four separate regimes.
The mechanics, in brief — and where the detail lives
The full explanation of §1256, the 60/40 split, year-end mark-to-market, Form 6781 and the three-year loss carryback belongs on one page rather than being repeated per contract, and it is on futures trading taxes. The short version, so this page stands on its own:
- 60/40 is automatic. Gains and losses on a qualifying contract are treated as 60% long-term / 40% short-term regardless of holding period, with no election to file. For most traders that puts the top blended federal rate near 26.8% rather than up to 37%.
- Open positions are marked to market at year-end. A position still open on December 31 is generally treated as sold at the closing price that day, and the resulting gain or loss counts for that year even though nothing was closed.
- Reporting runs through Form 6781, not Schedule D directly, and the broker's 1099-B generally reports a §1256 aggregate figure rather than trade-by-trade detail.
- Wash sales generally do not apply to §1256 contracts — a loss taken and the position immediately reopened is typically still deductible, unlike the equity side.
- Losses can typically be carried back three years against prior §1256 gains by election, which is unusual and worth knowing after a bad year.
- Commissions and exchange fees generally reduce the gain or increase the loss rather than being separate deductions; platform, data and subscription costs are a different category — see trader tax deductions.
Two adjacent decisions interact with all of this: whether you qualify for trader tax status, and whether a §475 mark-to-market election makes sense — noting that electing MTM on commodities can convert §1256 gains into ordinary income, which usually works against a futures trader. Because nothing is withheld from trading gains, quarterly estimated payments are generally how traders avoid an underpayment penalty.
Does an ES or NQ payout from a prop firm get the same 60/40 treatment?
Typically no, and this is the most expensive misunderstanding on this page. Section 1256's 60/40 split attaches to a qualifying contract held in your own account. When you trade an ES or NQ inside a funded account belonging to Apex, TopStep or Tradeify or any other prop firm, the contract is not yours — the firm's is. What you receive is a share of profits paid for your trading services.
For most US traders that payout is therefore ordinary income, commonly self-employment income on Schedule C, carrying income tax at your marginal rate plus 15.3% self-employment tax on 92.35% of net earnings — not the roughly 26.8% blended ceiling that applies to your own an ES or NQ positions. The instrument being traded does not change that; the ownership of the account does.
A trader who reports prop payouts as 60/40 gains may be understating tax on a position that is difficult to support. A trader who reports their own an ES or NQ profits as ordinary income may be overpaying. A trader who does both in the same year has two different kinds of income and typically tracks them separately — same screen, same ticker, different tax character. Detail on prop firm taxes and, per firm, on the Apex, TopStep and Tradeify guides.
Frequently Asked Questions
Are NQ futures taxed at 60/40?
Generally yes. NQ (E-mini Nasdaq-100) is a CME-listed regulated futures contract and typically falls under Section 1256, which splits gains and losses 60% long-term / 40% short-term regardless of holding period and with no election to file. For most traders that puts the top blended federal rate near 26.8% rather than up to 37% on short-term gains. Reporting runs through Form 6781.
Is MNQ taxed the same as NQ?
Typically yes. MNQ is the micro version of the same CME-listed Nasdaq-100 contract, so it generally receives the same Section 1256 treatment. The micro is a size difference, not a tax difference. What it does change is transaction volume — more fills to reconcile against the broker’s 1099-B, though Section 1256 activity is generally reported as an aggregate figure rather than trade-by-trade.
Are MES and ES taxed differently?
Generally no, for the same reason MNQ and NQ are not. MES is the Micro E-mini S&P 500 and ES the standard E-mini, both CME-listed regulated futures contracts typically inside Section 1256. Scaling down to micros to manage risk does not change the tax treatment.
Do single stock futures get 60/40 treatment?
Generally not for a non-dealer trader. Securities futures contracts on a single company are typically excluded from Section 1256, so they usually do not receive the 60/40 split even though they are called futures. With single-name contracts listed from 2026 this is a live distinction rather than a historical one, and it is worth confirming the specific contract before assuming index-futures treatment carries over.
What happens to open ES or NQ positions at year end?
Section 1256 positions are generally marked to market: a position still open on December 31 is typically treated as sold at that day’s closing price, and the resulting gain or loss counts for that tax year even though nothing was closed. No election is needed — it happens automatically. Traders carrying positions across the year boundary sometimes do not realise each one is marked.
If I trade NQ at a prop firm, do I still get 60/40?
Typically no. Section 1256 attaches to a qualifying contract held in your own account. In a funded account the contract belongs to the firm, so the payout is generally compensation for a service — ordinary income, commonly self-employment income on Schedule C with 15.3% self-employment tax, rather than the roughly 26.8% blended ceiling on your own positions. Same ticker, different tax character, decided by who owns the account.
Related resources
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General information about US tax treatment of exchange-traded futures, not personalized tax advice; TraderTax is a platform that matches traders with licensed tax professionals rather than a CPA firm. Contract specifications are deliberately not reproduced here — confirm the current contract on the exchange's own specification page, since whether a specific contract qualifies under §1256 can turn on facts particular to the instrument. Every tax situation has unique facts; a CPA who specializes in trader taxation can confirm what applies to you.