PayoutTax

Year-end tax checklist for funded traders

Updated October 27, 2026 · For the 2026 tax year

December is the last month you can still change your 2026 tax bill on prop firm payouts. A few steps now can avoid an underpayment penalty and a surprise in April. Here's the checklist, with the IRS rule behind each step.

1. Add up the year

List every payout you received in 2026 (firm, date, amount) and every trading cost you paid: evaluation fees, resets, activation fees, data and platforms. Payouts count in the year they land, whether or not a 1099-NEC arrives. Put the totals into the calculator to see what the year's payouts add to your tax.

2. Check whether you've paid enough

To avoid the underpayment penalty, what you've paid during the year (withholding plus estimated payments) generally needs to reach the smaller of:

If you had a day job all year, your withholding may already cover much of it. If you're short, there are two ways to close the gap, below. More detail: quarterly estimated taxes.

3. If you have a day job: raise your W-4 withholding for December

The IRS treats withholding as paid evenly through the year unless you choose otherwise, even if most of it comes out of your last paychecks. So extra withholding in December can cover earlier quarters you missed, which an estimated payment made now can't do. Ask your employer how many paychecks are left, and give them a new W-4 with an extra amount per paycheck. The calculator shows a suggested amount.

4. Otherwise: the January 15 payment

The fourth 2026 estimated payment is due January 15, 2027. You don't have to make it if you file your 2026 return by February 1, 2027 and pay everything you owe with it. Paying in December is fine too; it counts on the day you pay. See the January 15 payment for how much and how to pay. Most states with an income tax have their own estimated payments and dates.

5. Time your trading costs, but don't buy them for the deduction

Most traders use the cash method: you deduct an expense in the year you actually pay it. An evaluation or data subscription paid on December 31 counts for 2026; paid on January 2, it counts for 2027. Something paid in advance (a year of data, for example) is deductible only in the year it applies to.

A deduction only gives back part of what you spend. In the example in deducting evaluation fees, $500 of costs saves about $173 of tax, so a fee you didn't need still costs you about two-thirds of its price.

6. Decide about a retirement plan

A SEP IRA or a Solo 401(k) can take a large part of your payout profit off your taxable income. You can set up a SEP for 2026 as late as your return's due date, including extensions. A sole proprietor with no employees can also adopt a Solo 401(k) after year end, by the filing deadline without extensions. See SEP IRA and Solo 401(k) for funded traders.

In January

Planning information, not tax advice. Your CPA can confirm what applies to you.

Sources

General information, not tax advice. This guide explains common rules for US funded traders; your situation may differ. It isn't a substitute for a licensed CPA or IRS enrolled agent, so review your own numbers with one before you file or pay.

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