You report your option put and call trades on Internal Revenue Service Form 8949, Sales and Other Dispositions of Capital Assets. Enter the option’s trading symbol in column A, the date you opened the trade in column B, the date you closed the trade in column C and the gross proceeds in column D.
How much are call options taxed?
Short-term capital gains usually apply to assets held for less than a year and are taxed at your ordinary marginal tax rate. Long-term capital gains (on assets held for at least a year) are taxed at 0, 15 or 20 percent, depending on your annual income.
How are puts taxed?
If you exercise a put option by selling stock to the writer at the designated price, deduct the option cost (the premium plus any transaction costs) from the proceeds of your sale. Your capital gain or loss is long term or short term depending on how long you owned the underlying stock.
How do I report an expired put option on my tax return?
Report it on Part I of Form 8949 as follows: Enter the option expiration date in column (c), the $1,500 as sales proceeds in column (e), “expired” in column (f). If you wrote the option in the year before it expires, there are no tax consequences in the earlier year.
How to report put and call options on tax returns?
You report your completed put and call option transactions to determine if you owe capital gains tax. If you report a loss, you can use that amount to offset any capital gains you might have.
How are gains and losses calculated for call and put options?
Gains and losses are calculated when the positions are closed or when they expire unexercised. In the case of call/put writes, all options that expire unexercised are considered short-term gains. Below is an example that covers some basic scenarios:
Do you have to pay taxes on covered calls?
Tax treatments for in-the-money (ITM) covered calls are vastly more intricate. When writing ITM covered calls, the investor must first determine if the call is qualified or unqualified, as the latter of the two can have negative tax consequences.
What kind of tax treatment do I get for exercising call options?
Exercising in-the-money options, closing out a position for a gain, or engaging in covered call writing will all lead to somewhat different tax treatments. When call options are exercised, the premium paid for the option is included in the cost basis of the stock purchase.
