How are the gains taxed on credit spreads and iron condors that use the SPX and RUT indexes?
Because the SPX (S&P500 index) and RUT (Russell 2000 index) are classified as cash settled, broad market indexes, options that are traded on these indexes are taxed per the IRS Section 1256 contracts 60/40 rule. Per the 60/40 rule, sixty percent of the gains are taxed as long-term capital gains which is currently at 15%, and 40% of the gains are taxed as standard earned income. By placing option trades on cash settled, broad market indexes we get generous tax benefits. For more information, do a Google search on “IRS section 1256 tax 60/40 rule” and you will find more information on this topic. Please make sure to talk to a tax professional for all up to date information on this topic. We are not licensed tax professionals and we are not authorized to give tax advice.
How are the gains taxed on credit spreads and iron condors that use the SPX and RUT indexes?
Because the SPX (S&P500 index) and RUT (Russell 2000 index) are classified as cash settled, broad market indexes, options that are traded on these indexes are taxed per the IRS Section 1256 contracts 60/40 rule. Per the 60/40 rule, sixty percent of the gains are taxed as long-term capital gains which is currently at 15%, and 40% of the gains are taxed as standard earned income. By placing option trades on cash settled, broad market indexes we get generous tax benefits. For more information, do a Google search on “IRS section 1256 tax 60/40 rule” and you will find more information on this topic. Please make sure to talk to a tax professional for all up to date information on this topic. We are not licensed tax professionals and we are not authorized to give tax advice.
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