Taxes On Commodities Trading May Increase

Commodities traders have enjoyed a favorable tax treatment since 1981. Commodities futures contracts are taxed on a 60/40 basis, where 60 percent of the gains are taxed as long-term gains and 40 percent of the gains are taxed as short-term gains. This may change as new tax proposals may eliminate this favorable tax treatment for 2010.

The initial 2010 revenue proposal from the U.S. Treasury seeks to eliminate the long standing tax breaks that many commodity traders enjoy. However, this proposal only targets futures dealers and not the retail traders. This may be considered good news for normal commodity traders, but it may only be a matter of time before the Obama Administration also comes looking for the retail trader.

This is only a proposal and it was released in May 2009. There have also been other discussions from members of Congress who wish to increase taxes on commodity futures traders and especially stick it to day traders. There has also been a proposed tax on daily profits and even an increase in fees for day trades.

Times are changing and the government is looking to increase taxes wherever possible. There is no doubt the general public cares much about the derivatives markets and futures traders. Therefore, politicians think they can go in for the easy money.

The end result of this proposal passing would mean less liquidity for the futures and options markets. Dealers would also pass their costs along to the retail traders, which leads to less trading.