A financial transaction tax is a fee, usually a small percentage of the trade’s value, charged when someone sells, buys, or issues a security. In the United States, the only one currently in effect on securities trades is the SEC’s Section 31 fee, set at $20.60 per million dollars of sales as of April 4, 2026.1U.S. Securities and Exchange Commission. Section 31 Transaction Fee Rate Advisory for Fiscal Year 2026 Americans who buy foreign stocks may also owe transaction taxes to other countries, and Congress has repeatedly proposed a broader domestic levy that would apply at rates many times higher than what exists today.
These taxes generally fall into two groups. Transfer taxes apply every time an existing security changes hands on a secondary exchange. Issuance taxes apply once, when a company first creates and distributes securities. The instruments covered typically include equities, bonds, and derivatives like options and futures. Governments use these charges to fund regulatory oversight, raise revenue, or discourage the kind of extremely high-frequency trading that can destabilize markets under stress.
The Section 31 Fee
Section 31 of the Securities Exchange Act of 1934 funds the SEC’s supervision of the securities markets. The current rate is $20.60 per million dollars of covered sales.1U.S. Securities and Exchange Commission. Section 31 Transaction Fee Rate Advisory for Fiscal Year 2026 Security futures transactions carry a separate assessment of $0.0042 per round turn.2FINRA. New Rate for Fees Paid Under Section 31 of the Exchange Act
One detail catches many investors off guard: the fee applies only to sales, not purchases. Regulation defines a “covered sale” as a sale of a security occurring on a national securities exchange or through a member of a national securities association.3eCFR. 17 CFR 240.31 – Section 31 Transaction Fees Buying 100 shares triggers nothing. Selling those shares later takes a fee out of your proceeds. At $20.60 per million, a $10,000 sale costs about two cents. Invisible in isolation. The math changes for firms executing millions of dollars in trades daily.
The rate also moves. The SEC adjusts it based on congressional appropriations and projected transaction volume, and it can change midyear. Earlier in fiscal year 2026 the rate was $0.00 per million before rising to $20.60 in April.2FINRA. New Rate for Fees Paid Under Section 31 of the Exchange Act
Who Actually Pays It
The exchanges and other self-regulatory organizations pay the SEC directly. They don’t absorb the cost. They pass it to broker-dealers, who pass it to customers. The statute is deliberately silent on how exchanges may recover the money, giving them flexibility to structure the pass-through however they choose.4U.S. Securities and Exchange Commission. Section 31 Transaction Fees: Basic Information for Firms
For an individual investor, the fee shows up on trade confirmations or monthly statements as a “regulatory fee” or “SEC fee.” Most brokerages deduct it automatically from sale proceeds during settlement, so you never have to calculate or remit anything. By the time funds land in your account, the fee has already been subtracted.
Institutions feel the impact differently. Hedge funds, proprietary trading firms, and large asset managers executing high volumes see these charges aggregate into meaningful overhead, and brokerages that handle retail order flow either absorb the cost as part of their fee structure or break it out as a separate line.
Foreign Transaction Taxes You May Owe
Buying foreign stocks, or even American Depositary Receipts representing foreign shares, can trigger transaction taxes imposed by other countries. These taxes apply regardless of where you live or where the trade is executed. Several major economies impose them:
- United Kingdom: a Stamp Duty Reserve Tax of 0.5% on electronic purchases of UK shares, rising to 1.5% for transfers into certain depositary receipt or clearance schemes.5GOV.UK. Tax When You Buy Shares: Overview
- France: 0.3% on purchases of equity securities in French companies with a market capitalization above €1 billion.
- Italy: 0.2% on purchases of equity securities in Italian companies with an average market capitalization above €500 million, with a separate fixed-amount levy on certain derivative contracts.
- Spain: 0.2% on purchases of equity securities in Spanish companies with a market capitalization above €1 billion.
Your U.S. brokerage handles the collection. The foreign government levies the tax on the firm facilitating the trade, and the firm recoups it from you, typically as a “foreign financial transaction fee” on your confirmation. This applies to ADR purchases too, not only direct foreign exchange trades, because the underlying shares are still connected to the taxing country. Check confirmations if you invest internationally. At 0.2% to 0.5% per trade, these charges are far larger than anything on the domestic side.
How These Fees Affect Your Federal Tax Return
Transaction-related fees and taxes are not separately deductible. The IRS treats them as adjustments to your cost basis. When you buy a security, costs like commissions and transfer fees get added to your purchase price to form your basis. When you sell, fees and taxes associated with the sale, including regulatory fees, are subtracted from your gross proceeds to calculate the amount realized.6Internal Revenue Service. Publication 550, Investment Income and Expenses
The effect is the same either way: these costs reduce your taxable gain or increase your deductible loss. You just can’t put them on Schedule A as a standalone item. For most investors the dollar amounts are trivial. Anyone trading frequently or dealing with foreign transaction taxes should still confirm that their brokerage reports the correct adjusted basis on Form 1099-B, because getting it wrong usually means overpaying capital gains tax.
Retirement Accounts and Crypto: Two Common Misconceptions
Many investors assume 401(k) plans and IRAs are shielded from financial transaction taxes. They aren’t. These accounts enjoy tax advantages on income and capital gains, but transaction-based fees like Section 31 still apply to sales executed within them. The fee is simply so small at current rates that nobody notices. If a broader tax were enacted, trades inside retirement accounts would be subject to it just like any other trades. The tax hits the transaction itself, not the account holder, so the tax-advantaged wrapper doesn’t help.
Where retirement accounts do benefit is indirectly. Many 401(k) plans invest through pooled funds that trade less frequently than an active individual account, so fewer taxable transactions occur in the first place. That’s a function of investment strategy, not a legal exemption.
Cryptocurrency is the other misconception, in the opposite direction. No federal financial transaction tax currently applies to digital asset trades. The Treasury Department’s 2024 final regulations on digital asset broker reporting specifically noted that they “do not change or impose any new tax obligations on digital assets.”7U.S. Department of the Treasury. U.S. Department of the Treasury Releases Final Regulations Implementing Bipartisan Tax Reporting Requirements for Brokers of Digital Assets Those rules require brokers to report gross proceeds on Form 1099, but the reporting obligation is not itself a tax. You still owe capital gains tax when you sell crypto at a profit. There is no additional per-transaction levy comparable to the Section 31 fee.
Proposed Federal Legislation Would Change the Math
The United States has never enacted a broad financial transaction tax covering all securities trades, but proposals resurface regularly. The most recent is the Wall Street Tax Act of 2025 (H.R. 4035), introduced in June 2025 and referred to the House Committee on Ways and Means.8Congress.gov. HR 4035 – 119th Congress (2025-2026): Wall Street Tax Act of 2025 The bill proposes a 0.1% tax on the fair market value of stocks, bonds, and derivatives sold, phased in over five years. Initial public offerings and short-term debt would be exempt. Proponents project $750 billion in revenue over a decade once the tax is fully implemented.
As of mid-2026, the bill has not advanced beyond introduction.8Congress.gov. HR 4035 – 119th Congress (2025-2026): Wall Street Tax Act of 2025 Similar bills have been introduced in prior sessions without reaching a floor vote. Advocates argue the tax would curb speculative trading and fund social programs; opponents argue it would reduce market liquidity and push trading activity overseas. If any version passes, the impact on everyday investors would be far larger than the current Section 31 fee. A 0.1% levy on a $10,000 sale is $10, compared to roughly two cents under current law.