The Retired Trader's Year-End Tax Checklist

December 31st is not just a holiday. For a retired prop firm trader, it is the final deadline on dozens of tax decisions that will follow you well into spring — and in some cases, two years into the future. Miss a step and you could owe unexpected penalties, trigger a Medicare surcharge, or lose a deduction you had every right to take.

This checklist is written specifically for US-based retirees who receive 1099-NEC income from futures prop firms like Topstep, Apex, Tradeify, or any of the other firms we review here. It is not a substitute for professional advice — but it is the list we wish we had when we first started trading in retirement.

✅ 1. Make Your Final Estimated Tax Payment (If Needed)

Prop firm payouts are not subject to automatic withholding. Unlike a W-2 job or Social Security, nobody is taking taxes out before you receive the money. That means it is entirely your responsibility to pay estimated quarterly taxes to the IRS — and the fourth-quarter payment deadline is January 15th of the following year (for income earned October 1 – December 31).

Before December 31, review your total prop firm payouts for the year and calculate whether you have paid enough through Q1–Q3 estimates. If you are short, sending an extra voluntary payment now (rather than waiting until January 15) can reduce potential underpayment penalties and give you clarity on your cash position heading into the new year.

• Use IRS Form 1040-ES to estimate and pay online via IRS Direct Pay.
• The safe harbor rule: pay at least 100% of last year's tax bill (or 110% if your AGI exceeded $150,000) to avoid penalties regardless of what you owe this year.
• Check your state's equivalent estimated tax deadlines — many mirror the federal calendar, but some differ.

✅ 2. Total Up All Your 1099-NEC Payouts — Every Firm

If you traded with multiple prop firms this year, you will receive a separate 1099-NEC from each firm where you earned $600 or more. Before year-end, log into every dashboard and download your payout history for the full calendar year. Do not wait for the 1099 to arrive in January — your records should already be complete.

Cross-check your own records against what firms are reporting. Errors happen. A firm that miscategorized a payout or applied a partial chargeback without your knowledge could create a discrepancy that costs you time and money to resolve in April.

• Keep a simple spreadsheet: date, firm name, gross payout amount, net received.
• Confirm each firm has your current address and SSN (or EIN if you operate through an LLC) on file before January 31st.
• Note: payouts processed on December 31st may not appear until January — reconcile carefully.

✅ 3. Harvest Trading Losses in Your Personal Brokerage Account

If you also trade your own personal brokerage account (separate from prop firm accounts), tax-loss harvesting before December 31 is one of the most powerful year-end moves available to you. Selling positions that are currently at a loss locks in that loss for the current tax year, which can offset capital gains — or up to $3,000 of ordinary income per year if losses exceed gains.

For retired prop firm traders, this is particularly valuable because prop firm income is taxed as ordinary income at your marginal rate. Harvested capital losses cannot offset 1099-NEC income directly (capital losses offset capital gains first), but by zeroing out taxable gains in your brokerage, you free up more of your income bracket headroom for the prop income.

✅ 4. Review Your IRMAA Exposure and Consider Timing Payouts

This one is unique to retirees on Medicare, and it is the trap that catches most people completely off guard.

Medicare Part B and Part D premiums are income-tested using a system called IRMAA (Income-Related Monthly Adjustment Amount). The critical detail: Medicare looks at your income from two years ago. So your 2026 prop firm payouts will directly affect your Medicare premiums in 2028.

The IRMAA income thresholds for 2026 (modified adjusted gross income, or MAGI) that trigger surcharges:

If your projected 2026 income is hovering near a threshold, consider whether delaying a payout request until January (pushing it into the 2027 tax year) is worth it to stay below the bracket. Conversely, if you know you are already well above a threshold, there may be no marginal harm in requesting additional payouts before year-end.

Read our full IRMAA guide for prop firm traders →

✅ 5. Take Your Required Minimum Distribution (RMD)

If you are age 73 or older (or 75 under SECURE 2.0 rules for those born after 1959), the IRS requires you to withdraw a minimum amount from your traditional IRAs, 401(k)s, and most other pre-tax retirement accounts each year. This is your Required Minimum Distribution (RMD).

The December 31 deadline is absolute. Miss it and the IRS imposes a 25% excise tax on the amount you should have taken but didn't. This has nothing to do with your prop firm income — but for many retirees, it is an easy thing to forget when you are focused on trading.

• Log into your IRA/401(k) custodian and confirm your RMD has been taken for this year.
• If you have multiple traditional IRAs, you can aggregate the RMD and take it all from one account — but the total must equal the sum of all RMDs.
• Your prop firm income does not reduce your RMD requirement — both must happen.
• Consider a Qualified Charitable Distribution (QCD): if you are over 70½, you can direct up to $105,000 of your RMD directly to a charity tax-free, which reduces your MAGI and may help with IRMAA.

✅ 6. Tally All Deductible Business Expenses

Your prop firm income is reported on Schedule C (Profit or Loss from Business). That means ordinary and necessary business expenses reduce the taxable income, including your self-employment tax exposure. Before December 31, compile everything you spent on your trading business this year:

• Prop firm evaluation and reset fees — all of them, even the ones you failed
• Platform and data subscriptions — NinjaTrader license, TradingView Pro, Tradovate, Rithmic, etc.
• Trading education — courses, books, webinars, coaching sessions directly related to your trading
• Home office deduction — if you have a dedicated room used exclusively for trading (consult your CPA on the exact calculation)
• Internet and phone — the business-use portion
• Hardware — monitors, keyboards, computers purchased this year for trading use
• Bank and wire fees — charged on payout withdrawals

If you have been sloppy about tracking expenses through the year, now is your last chance to compile receipts before December 31. Use a simple spreadsheet or a tool like QuickBooks Self-Employed to organize them.

✅ 7. Evaluate Whether an LLC or S-Corp Election Still Makes Sense

If you have been operating as a sole proprietor (trading under your own Social Security number), now is the time to ask your CPA whether setting up a single-member LLC — or electing S-Corporation status — for next year could reduce your self-employment tax burden.

The potential benefit: S-Corp status allows you to split your prop firm income into a "reasonable salary" (subject to payroll tax) and a "distribution" (which is not subject to the 15.3% self-employment tax). For traders earning $40,000+ per year in prop firm payouts, this can represent thousands of dollars in annual savings.

The catch: S-Corp elections for the following tax year must be filed with the IRS by March 15th — but you need to have your LLC formed and election paperwork ready well before then. December is the right time to start this conversation.

Read our full LLC and Solo 401(k) setup guide →

✅ 8. Max Out Your Solo 401(k) Contributions (If You Have One)

If you already operate through an LLC or sole proprietorship and have set up a Solo 401(k) (also called an Individual 401k or Self-Employed 401k), December 31 is the deadline to make employee contribution elections for the current year. Actual contributions can often be made until your tax filing deadline (including extensions), but the election must be in place before year-end.

• 2026 employee contribution limit: $23,000 (plus $7,500 catch-up if you are 50+)
• Employer (profit-sharing) contributions: up to 25% of compensation, due by tax filing deadline
• Combined limit (employee + employer): $70,000 for 2026
• Every dollar contributed reduces your MAGI — which can keep you below IRMAA thresholds

✅ 9. Review the Social Security Earnings Test (If You Are Under Full Retirement Age)

If you are collecting Social Security benefits but have not yet reached your Full Retirement Age (FRA) — which is 67 for anyone born after 1960 — the SSA applies an Earnings Test to your annual income. In 2026, if you earn more than $22,320 from work (which includes 1099-NEC prop firm income), the SSA withholds $1 in benefits for every $2 you earn above that threshold.

Before year-end, add up your total prop firm payouts plus any other earned income for the year. If you are approaching or have exceeded the earnings limit, contact the SSA to understand how this affects your current monthly payments — and whether it changes your payout strategy for December.

The silver lining: once you reach FRA, the earnings limit disappears entirely. And any benefits withheld before FRA are not lost — the SSA increases your monthly benefit permanently to recoup them.

Read our full Social Security & prop firm income guide →

✅ 10. Sit Down With Your CPA — Before They Get Buried in January

This one sounds obvious, but it is the most important item on the list. Tax professionals are extraordinarily hard to reach in February and March. The traders who get the best advice — and avoid the most costly mistakes — are the ones who schedule a year-end planning meeting in November or December, not after they receive their W-2s in January.

Bring this checklist to that meeting. Bring your payout records, your expense logs, and your brokerage statements. Ask specifically:

• "Based on my prop firm income this year, do I owe any estimated tax catch-up by January 15?"
• "Will my 2026 income trigger an IRMAA surcharge in 2028, and is there anything I can do now?"
• "Is my expense documentation sufficient for a Schedule C filing?"
• "Should I be operating through an LLC or S-Corp next year?"
• "Am I on track with my RMD?"

A good CPA who understands both retirement income and self-employment income is worth every dollar of their fee. If yours does not understand 1099-NEC income from prop trading, it may be time to find one who does.

The Bottom Line

Trading prop firms in retirement is one of the most exciting ways to generate supplemental income — but it comes with tax complexity that most retirees are not prepared for when they receive their first payout. The good news is that with a little planning before December 31, you can minimize your tax bill, protect your Medicare premiums two years from now, and walk into the new year with a clean financial picture.

Set a reminder in your calendar right now: "Year-end tax review — December 1." Give yourself the full month of December to work through this list. Do not be the trader who discovers in March that they owe $4,000 they did not plan for.