Special Rule for Traders in Financial Instruments or Commodities

Gains and losses from your trade or business of trading in financial instruments or commodities aren’t subject to self-employment taxes. However, interest expense and other investment expenses are deducted by a trader on Schedule C (Form 1040), Profit or Loss From Business, if the expenses are from the trading business. A special rule may apply to a trader in financial instruments or commodities to reduce NII. The trader’s interest and other investment expenses, to the extent the expenses aren’t

6 Instructions for Form 8960 (2025)

used to reduce the trader’s self-employment income, may be deductible for NIIT.