Mark-to-Market Election (Section 475) for Traders: Should You Make It?

For a qualifying active trader, the mark-to-market (MTM) election under Section 475 is one of the most powerful tax moves available — and one of the easiest to miss because the deadline is unforgiving. Here's what it does and who should consider it.

What is the Section 475 MTM election?

Normally your positions are taxed when you close them. Under a 475 election, open positions are treated as if sold at year-end (“marked to market”), and your trading gains and losses become ordinary rather than capital.

Why traders elect it

No more wash-sale rule — the single biggest accounting headache for active traders disappears.
No $3,000 capital-loss cap — trading losses become ordinary and can offset other income.
Cleaner year-end — far simpler reconciliation for high-volume traders.

The catches

You generally need Trader Tax Status first — MTM is for traders operating as a business. (Check whether you qualify for Trader Tax Status.)
The deadline is strict — the election is typically filed early in the tax year, not after the fact.
It's sticky — revoking later requires its own process, so it's a deliberate decision.

FAQ

Do I lose long-term capital gains rates? On trading positions under 475, yes — gains are ordinary. Many active traders weren't getting long-term rates anyway.

Can I elect MTM without TTS? The election is designed for qualifying traders; getting TTS right comes first.

Get it right: Our Trader Tax Status (TTS) Guide covers the 475 election, deadlines, and documentation — bundle it with daily market signals in the Complete Bundle.