TopStep Taxes: How to File TopStep Payout Income (2026)

TopStep is one of the most established prop firms in the futures trading industry. Whether you earned your funded account through the Trading Combine or Express Funded path, the tax treatment is the same — and it catches many traders off guard.

If you've received payouts from TopStep in 2025 or 2026, this guide explains exactly how that income is classified, what forms you'll receive, what you can deduct, and how to file correctly.

How TopStep Classifies Your Income

TopStep pays you a percentage of the profits you generate in your funded account. In the eyes of the IRS, this makes you an independent contractor — not an investor. You are performing a service (trading) in exchange for compensation (profit share).

This means TopStep income is ordinary self-employment income, subject to:

• Federal income tax at your marginal rate (10%–37%)
• Self-employment tax of 15.3% on net earnings up to $168,600 (2026 limit)
• State income tax (varies by state)

TopStep issues a 1099-NEC to all US-based traders who earn $600 or more in annual payouts. The IRS receives a copy, so the income must be reported on your return.

Trading Combine vs Express Funded — Tax Differences

TopStep offers two paths to a funded account: the Trading Combine (a multi-step evaluation) and Express Funded (a faster single-step path). From a tax perspective, the distinction matters primarily for deductions:

Both paths produce the same tax outcome: your payouts are self-employment income, and all fees paid to TopStep are deductible business expenses. The only difference is whether your deductions are monthly subscriptions (Trading Combine) or one-time fees (Express Funded).

TopStep Payout Methods and Tax Implications

TopStep processes payouts through direct deposit and Payoneer. Both methods produce taxable income — the payment method does not change the tax treatment.

• Direct deposit — Funds appear in your bank account. Easy to track via bank statements.
• Payoneer — Funds are deposited to your Payoneer account. Make sure to track these separately — Payoneer may not appear on your regular bank statements.

When you receive a payout matters for taxes. A payout received on December 30, 2025 is 2025 income — even if you don't spend it until 2026. A payout on January 2, 2026 is 2026 income. Check the actual deposit date, not the request date.

What TopStep Traders Can Deduct

As a self-employed trader, you can deduct all ordinary and necessary business expenses against your TopStep income. These deductions reduce your taxable income dollar-for-dollar.

• Trading Combine subscription fees — Every month you paid for the Combine is deductible.
• Express Funded activation fees — The one-time fee is fully deductible in the year paid.
• Reset and retry fees — Paid to restart an evaluation? Deductible.
• Platform software — NinjaTrader, Tradovate, TradingView, Sierra Chart.
• Market data fees — CME data, exchange subscriptions.
• Trading education — Courses, mentorship, paid trading communities.
• Home office — Dedicated trading space in your home (simplified or regular method).
• Equipment — Monitors, computers, desks, keyboards.
• Internet and phone — Business-use percentage deductible.
• Professional services — CPA fees, tax preparation, bookkeeping.

Step-by-Step: Filing Your TopStep Taxes

Step 1 — Download Your TopStep Payout History

Log into your TopStep dashboard and export a complete record of all payouts received during the tax year. If you used Payoneer, also download your Payoneer transaction history to cross-reference.

Step 2 — Match Against Your 1099-NEC

TopStep sends the 1099-NEC by January 31. Compare the reported amount against your payout records. If there's a discrepancy, contact TopStep support before filing. Your tax return amount must align with what TopStep reported to the IRS.

Step 3 — Calculate Total Deductions

Review all TopStep-related expenses: Combine subscriptions, Express Funded fees, resets, platform costs, data feeds, equipment, and home office. Organize by category and keep receipts for every expense.

Step 4 — File Schedule C

Report your total TopStep payouts as gross income on Schedule C, Part I. Enter your itemized deductions in Part II. Your net profit (income minus expenses) is what flows to your 1040 and is subject to income tax.

Step 5 — Pay Self-Employment Tax

Complete Schedule SE using your net profit from Schedule C. Self-employment tax is 15.3% on 92.35% of your net earnings. Remember: you can deduct half of SE tax as an adjustment to income on your 1040.

Step 6 — Plan for Next Year

Set up quarterly estimated tax payments to avoid penalties next year. If your net TopStep income exceeds $50,000–$80,000 consistently, consider forming an LLC with S-Corp election to reduce SE tax. See: LLC vs S-Corp for Traders.

Quarterly Estimated Taxes

TopStep does not withhold taxes from your payouts. You receive the full amount and must manage your own tax payments.

TopStep + Other Prop Firms

If you trade TopStep alongside Apex, Tradeify, or other firms, all prop firm payouts are combined as self-employment income on a single Schedule C. You may receive separate 1099s from each firm — make sure each one matches your records.

Common TopStep Tax Mistakes

• Not tracking Payoneer payouts separately — Payoneer income may not show on your bank statements. Track it independently.
• Missing evaluation fee deductions — Every Trading Combine month and Express Funded fee is deductible, including failed attempts.
• Skipping quarterly estimated payments — Results in IRS underpayment penalties even if you pay everything when you file.
• Reporting TopStep income as capital gains — Incorrect classification that can trigger an IRS audit.
• Not keeping records of payout dates — The date you received the funds (not requested them) determines which tax year the income belongs to.