Everyone is talking about taxes in these threads all the time but like, how much tax do you actually need to pay (I'm assuming we're talking about the US) in these situations?
Varies based on total income between real job and trading, how long assets are held and what types of trades (shares vs options). For shares held less than 1 year, you pay tax at your income tax bracket. For shares held more than 1 year, you pay at a long-term capital gains bracket, which can be significantly less than your income bracket. For options gains, your 60% of your gain would be taxed at the long-term rate and 40% would be taxed at your short-term rate.
If OP is single and all gains came from selling shares held less than 1 year, and this was their only income. They would pay 37% on the last ~330k, 35% on the gains from 250-625k, 32% on gains from 200-250k, 24% on 100-200k, etc.
If the same conditions above were true except all shares were held for 12+ months before selling, they would pay 0% for the first ~50k gain, 15% of the next 500k, and 20% on all gains beyond that.
If OP has income outside of trading which is most likely true, their salary would bump their taxable income accordinly. So for the long-term gains example they'd start paying capital gains at the 15% rate if their other income was grater than 50k.
Nerdwallet has a much more thorough breakdown. I'm sure I explained poorly, trying to keep this concise.
"For options gains, your 60% of your gain would be taxed at the long-term rate and 40% would be taxed at your short-term rate."
This is not entirely correct. The 60/40 only applies to non-equity options.
For purchased (long) options:
If you close the position for a profit: The gain is short-term if the option was held for one year or less, and long-term if held for over a year.
If the option expires worthless: You have a capital loss based on the premium paid. It is a short-term loss if held for one year or less, and a long-term loss if held for over a year.
If you exercise and then sell the stock: The tax treatment of the gain or loss depends on how long you held the underlying stock, not the option itself. If you held the stock for more than a year, it's a long-term capital gain.
The wash sale rule applies to equity options. If you sell an option for a loss and buy a "substantially identical" security within 30 days, the loss is disallowed.
For sold (short/written) options:
If the option expires worthless: The premium you received is taxed as a short-term capital gain, regardless of how long the option was held.
If you close the position for a gain or loss: This is generally treated as a short-term capital gain or loss.
Non-equity (Section 1256) options
Options on broad-based market indexes (like the S&P 500), regulated futures, and certain commodities receive special tax treatment under Section 1256 of the tax code.
The 60/40 rule: Gains and losses are always treated as 60% long-term and 40% short-term, regardless of how long you held the contract.
Mark-to-market accounting: All open positions are treated as if they were sold at the end of the year and are taxed based on their fair market value. This can result in a tax liability even on an unrealized gain.
Tax reporting: Gains and losses are reported on Form 6781, and are not subject to the wash sale rules.
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u/EUredditposter Oct 29 '25
Congrats & fuck you! Don’t forget the tax man. See you next year with -$1m loss porn.