Why Is the 60/40 Split Considered a Tax Advantage for Short-Term Traders?

The 60/40 split is advantageous for short-term traders because 60% of their net gains are taxed at the lower long-term capital gains rate, even if the contracts were held for less than a year. Short-term gains from non-Section 1256 assets are taxed at the higher ordinary income tax rates.

This rule effectively lowers the overall effective tax rate on short-term profits from Section 1256 contracts.