How Do I Report a Call Option on My Tax Return?
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.
