selling puts - how to report tax?

[joesxm3]

I sold a put contract yesterday and received $1075. I bought it back today for $875, giving a $200 profit (close enough to actual for discussion).

I am assuming that this is a STCG and would be reported on the same form that I use to report a STCG for a non-option stock trade.

What has me wondering is how the proceeds from the sale and the cost or other basis parts are filled out. I took a quick look at the instructions for form 8949 and it did not jump out at me.

Do I fill things out backwards? That is:

Date of sale 11/10/2021, proceeds from sale $1075
Date acquired 1/11/2021, cost or basis $875
Gain or Loss $200

I will be using Turbo Tax, so maybe it has some screens to guide me. But I figured I would ask since I am curious.

Thanks.

Joe

 

[NW-Bound]

First important rule: When you sell short an option, then buy it back to cover, the gain/loss is always considered a short-term capital gain/loss, even if you hold it longer than 1 year.

You will use Form 8949 to report option trades, which then flows into Schedule D.

"Short sales are not reported the same as long trades. Basically, short sales get reported on IRS Form 8949 using the date that you closed or covered the short trade for both the Date Acquired and Date Sold."

I make several thousand option trades each year. I avoid the tax reporting hassle by making trades only in my before-tax accounts. Because there's no way you can get a reduced tax via long-term capital gain treatment for shorting options, there's no advantage to making short trades in an after-tax account. Besides, my option trades are always short-term with a duration of 1 month or less.

 

[tulak]

+1 on using tax sheltered accounts.

I bailed on Robinhood and used Fidelity for this reason. Even though Robinhood’s app is much, much better than Fidelity.

 

[joesxm3]

I can only do covered calls in my IRA due to my pathetically low level 1 status.

Even though I had level 2 on my taxable account, some uncaring algorithm decided that because I was managing my AGI to under $40k for ACA purposes I had too low of an income to be trusted with level 2 when I applied for the IRA.

Next year I will be doing ROTH conversions so maybe I can get a promotion.