The Complete Prop Trading Tax Guide for 2026

Prop firm traders are typically classified as independent contractors and receive a 1099-NEC. This guide covers federal income tax, self-employment tax, state-level rules, quarterly estimated payments, and the deductions every funded trader should know about.

Topics covered

• 1099-NEC reporting and what to expect from prop firms
• Self-employment tax (15.3%) and how to calculate it
• Quarterly estimated tax payments to avoid IRS penalties
• State income tax variations across all 50 US states
• Common deductions: home office, software, education, data feeds
• When to hire a CPA who understands trader taxation