How Does the 60/40 Rule Affect a Trader in a High-Income Tax Bracket?

For a high-income trader, the 60/40 rule is highly beneficial. Since 60% of the gain is taxed at the lower long-term capital gains rate (which is capped), and only 40% is taxed at the high ordinary income rate, the blended effective tax rate is significantly lower than if 100% were taxed as short-term gain.

This provides substantial tax savings for active, profitable traders.