Do I pay taxes when I sell covered calls?

Do You Owe Taxes on Options Income?

🛑 Short answer: YES.

If you’re selling options in a taxable brokerage account, you’ll owe capital gains taxes on your profits.

When Are Options Taxed?

📈 You owe taxes when you realize capital gains, such as:
✅ An option expires worthless, and you keep the full premium.
✅ A covered call is assigned, and your shares are sold at a profit.
✅ You buy back to close an option early, pocketing a partial premium.
✅ You roll an option to a future date for additional premium.
✅ You close a LEAPS position for a profit.

🚨 Most options are taxed as short-term capital gains (like your paycheck).
💰 Held an option for 1+ years? You may qualify for lower long-term capital gains rates.

How Are Cash-Secured Puts Taxed?

💰 If the put expires worthless → You keep the premium as short-term capital gain.
📉 If assigned (you buy 100 shares) → The premium lowers your cost basis.

Later, if you sell the stock via a covered call, you’ll owe taxes based on the difference between the adjusted cost basis and the covered call strike price.

Track Your Trades & Stay Ahead of Taxes!

📊 Don’t rely on your brokerage to track taxes!
🔎 Keep records & consult a tax pro for your situation.

Want to earn passive income selling covered calls?

👉🏻Join my FREE Passive Income Master Class

Happy investing!
-Steve