How Are Commodities Taxed? Section 1256, ETFs, and IRAs

Commodity profits are not taxed the same way as stock profits, and the rate depends on what you actually own. How are commodities taxed under current federal rules? Physical metals like gold and silver are treated as collectibles and capped at a 28% long-term rate. Regulated futures contracts fall under Section 1256, which blends 60% long-term and 40% short-term treatment for a top rate near 26.8%. Commodity ETFs inherit whichever regime matches their legal structure. And investors above certain income thresholds owe an additional 3.8% surtax on top of any of these rates.

Physical Gold, Silver, and Other Metals

The IRS classifies tangible commodities such as gold bullion, silver coins, platinum bars, and similar holdings as collectibles.¹ That single classification drives the rate. Long-term gains, meaning gains on metal held more than one year, are capped at 28%. If your ordinary bracket is below 28%, you pay the lower ordinary rate on the gain. If your bracket is 32%, 35%, or 37%, the collectible cap protects you from paying those higher rates on the metal.

Sell before the twelve-month mark and there is no cap. The gain is short-term and taxed at your ordinary income rate, which reaches 37% for 2026. The holding period starts the day after you acquire the commodity and ends on the day you sell.

Your cost basis is more than what you paid the dealer. Commissions, dealer markups, shipping, and insurance during transit all add to the purchase price. When you sell, subtract that adjusted basis from the net proceeds to get the taxable gain. Keep the receipts. If you bought from a private seller who filed no report with the IRS, you still owe tax on the gain and you are responsible for documenting your own basis.

Futures and Non-Equity Options Under Section 1256

Regulated futures contracts and non-equity options on commodities are Section 1256 contracts, and Section 1256 ignores how long you actually held the position.² Sixty percent of every gain or loss is treated as long-term and 40% as short-term. A trader who closes a crude oil position after two days gets the same 60/40 split as someone who held a corn contract for fourteen months.

For someone in the top bracket, the math produces a maximum blended rate of about 26.8% before the surtax: 60% at the 20% long-term rate plus 40% at the 37% short-term rate. That is meaningfully lower than the 37% a stock day trader would owe on identical short-term profits, which is one reason active commodity traders concentrate in futures.

Year-End Mark-to-Market

Every open Section 1256 position is treated as if sold at fair market value on the last business day of December. Any unrealized gain or loss counts on that year’s return, and your basis for the following year resets to the December 31 value.² You cannot sit on a winning contract to defer tax, but you can also recognize losses on positions you have not closed.

Three-Year Loss Carryback

Section 1256 gives individuals a rare loss carryback. If your net Section 1256 losses exceed your gains for the year, you can carry the excess back to offset Section 1256 gains from the three preceding years and claim a refund on taxes already paid.³ Most capital losses only carry forward. The carryback is available to individuals only; corporations, estates, and trusts are not eligible. You claim it by filing Form 1045 or an amended return with an amended Form 6781 and Schedule D for each carryback year.

Commodity ETFs: The Wrapper Sets the Rate

A commodity ETF’s tax treatment depends almost entirely on its legal structure. Three structures dominate, and each hands you a different result.

Grantor Trusts

Funds that hold physical bullion in a vault, such as SPDR Gold Shares, are typically grantor trusts. The IRS treats each shareholder as a direct owner of a proportional slice of the metal in storage. Because the underlying asset is a collectible, long-term gains on shares held more than a year are taxed at the 28% collectible rate.¹ Shares sold within twelve months are taxed at ordinary rates, the same as a direct sale of bullion. Reporting comes on a Form 1099-B.

Publicly Traded Partnerships

Commodity ETFs that hold futures rather than physical metal are usually publicly traded partnerships. Because the fund’s internal positions are Section 1256 contracts, the 60/40 blended rate passes through to shareholders.² The fund issues a Schedule K-1, not a 1099. You report your share of the fund’s gains and losses whether or not you sold shares or received a distribution, because mark-to-market rules apply at the fund level. You may owe tax on paper gains you never cashed out.

Regulated Investment Companies

A smaller number of commodity ETFs are structured as regulated investment companies, the same wrapper used by most stock and bond funds. They gain commodity exposure through subsidiaries or swaps and distribute gains as ordinary short-term or long-term capital gains. You get a 1099-DIV rather than a K-1. The tradeoff is that the 60/40 blend does not pass through. Short-term distributions are taxed at your ordinary rate, and long-term distributions follow the standard 0%, 15%, or 20% schedule rather than the collectible rate or the Section 1256 blend.

The 3.8% Net Investment Income Surtax

Every rate above can rise by 3.8 percentage points if your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). The net investment income tax under Section 1411 applies to capital gains, interest, dividends, rental income, and royalties, and the statute specifically covers income from trading in commodities.⁴ Those thresholds are not indexed for inflation.

With the surtax included, the effective ceilings look like this:

Physical commodities (collectibles): 28% + 3.8% = 31.8%
Section 1256 futures: 26.8% + 3.8% = 30.6%
Standard long-term capital gains from RIC ETFs: 20% + 3.8% = 23.8%
Short-term gains at the top bracket: 37% + 3.8% = 40.8%

The surtax applies to the lesser of your net investment income or the amount your MAGI exceeds the threshold, so not every dollar of commodity gain necessarily gets hit with the full 3.8%.⁵

Wash Sales

The wash sale rule under Section 1091 disallows a loss when you sell a security and repurchase the same or a substantially identical security within 30 days. That rule applies to stock and securities. Physical commodities are neither, so selling gold at a loss and buying it back the next day does not trigger a wash sale disallowance.

Section 1256 contracts have their own explicit exemption for losses recognized through the year-end mark-to-market process.² Commodity ETF shares are a different matter. Shares in a regulated investment company or a publicly traded partnership may be treated as securities for wash sale purposes, so selling a commodity ETF at a loss and buying it back within 30 days can trigger the disallowance even though the underlying commodity would not.

Commodities Inside an IRA

Retirement accounts change the analysis. In a traditional IRA, gains grow tax-deferred and are taxed as ordinary income on withdrawal, regardless of whether the asset would have qualified for the 28% collectible rate or the 60/40 blend in a taxable account. Roth IRA distributions, if qualified, are tax-free.

The IRS restricts which metals can go into an IRA. Under Section 408(m), most collectibles are prohibited, but certain gold, silver, platinum, and palladium bullion meeting minimum fineness requirements are allowed if a bank or approved non-bank trustee holds physical possession.⁶ Certain U.S.-minted coins also qualify. If you put ineligible collectibles into an IRA, the IRS treats it as a distribution, triggering income tax and a potential 10% early withdrawal penalty.

The UBTI Trap for Partnership ETFs

Holding a futures-based ETF structured as a publicly traded partnership inside an IRA creates a subtler problem. Partnership income flowing into a tax-exempt account can generate unrelated business taxable income. When UBTI exceeds $1,000 in a year, the IRA must file Form 990-T and pay tax on the excess at trust tax rates.⁷ Grantor trust ETFs backed by physical metal do not generate UBTI. A regulated investment company structure also avoids it, so an investor who wants futures exposure inside an IRA can sidestep the issue by choosing the wrapper carefully.

Which Forms You File

The reporting forms follow the type of commodity investment. Using the wrong form or skipping one is where most errors happen.

Form 6781 for Section 1256 Contracts

Gains and losses from regulated futures and non-equity options flow through Form 6781 before reaching Schedule D. You report closed positions and the mark-to-market gains or losses on open positions in Part I.³ The net figure splits: 40% goes to Schedule D as short-term, 60% as long-term. Broker 1099-B amounts for Section 1256 contracts feed into Form 6781, not directly to Form 8949.⁸ Putting futures gains straight on Schedule D loses the 60/40 split and usually overpays.

Form 1099-B for Physical Sales and Grantor Trust ETFs

Selling physical gold, silver, or shares of a grantor trust commodity ETF generates a Form 1099-B from your broker or dealer.⁹ Gross proceeds appear in box 1d and cost basis in box 1e. A “Collectibles” checkbox in box 3 flags the transaction so you apply the correct rate.⁸ The figures move to Form 8949 and then to Schedule D.

Schedule K-1 for Partnership ETFs

Publicly traded partnership ETFs issue a Schedule K-1 rather than a 1099. The K-1 reports your share of the fund’s income, gains, losses, and deductions, and the amounts generally flow to Schedule E of your Form 1040.¹⁰ K-1s routinely arrive in March or April, well after 1099s, which pushes many investors to file for an extension using Form 4868. The numbers on a K-1 often do not match the cash value changes in your brokerage account because they reflect the fund’s internal mark-to-market accounting. Your tax basis in the partnership adjusts each year with those allocations, so keep every K-1 for as long as you hold the shares.

1
Cornell Law Institute. 26 USC 1(h)(5) – Collectibles Gain and Loss
2
Office of the Law Revision Counsel. 26 USC 1256 – Section 1256 Contracts Marked to Market
3
Internal Revenue Service. Form 6781 – Gains and Losses From Section 1256 Contracts and Straddles
4
Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
5
Internal Revenue Service. Net Investment Income Tax
6
Internal Revenue Service. Investments in Collectibles in Individually Directed Qualified Plan Accounts
7
Internal Revenue Service. IRA Partner Disclosure FAQ
8
Internal Revenue Service. Instructions for Form 1099-B (2026)
9
Internal Revenue Service. About Form 1099-B, Proceeds From Broker and Barter Exchange Transactions
10
Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065)