When does selling (writing) options count for tax purposes?
Generally speaking, you realize options gains or losses for (US) tax purposes when you close out the option position, or when it expires so in your example, if you're discussing an equity option, you'd realize the gain or loss next year, assuming you don't close it out prior to year end. But options  tax treatment can get messy fast: Still, if you have no other stock or option positions in the underlying during or within 30 days of the establishment of the naked put, and assuming the option isn't assigned, you won't realize any gains or losses until the year in which the option is closed or expires. If you take the profit or loss next year, it counts on next year's taxes.  There's no profit or loss until that happens.
Assuming that taxes were withheld when you received the options, you would now only owe tax on the profit from the sale of the stock.  The cost basis would be whatever you bought the stock for (the strike price of the options in this case), and the profit will be the total amount received from the sale minus the total cost of those shares. Since you bought the stock more than one year ago, you will get taxed at the long-term capital gains rate of 15% (unless you are in the 39.6% tax bracket, in which case the rate is 20%). As with all tax advice on this site, you need to check with a tax specialist when you actually file, but that should give you a rough indication of what your tax liability is. "You mention ""early exercise"" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned ""early exercise"" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise." With a short position you make your money (profit) when you buy the stocks back to close the position at a lower price than what you bought them at. As short selling is classed as speculation and not investing and you at no time own any actual assets, you cannot donate any short possition to charity. If you did want to avoid paying tax on the profits you could donate the proceeds of the profits after closing the position and thus get a tax deduction equal to the profits you made. But that raises a new and more important question, why are you trading in the first place if you are afraid to make profits in case you have to pay tax on those profits? First, it depends on your broker.  Full service firms will tear you a new one, discount brokers may charge ~nothing.  You'll have to check with your broker on assignment fees. Theoretically, this is the case of the opposite of my answer in this question: Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? Your trading strategy/reasoning for your covered call notwithstanding, in your case, as an option writer covering in the money calls, you want to hold and pray that your option expires worthless.  As I said in the other answer, there is always a theoretical premium of option price + exercise price to underlying prices, no matter how slight, right up until expiration, so on that basis, it doesn't pay to close out the option. However, there's a reality that I didn't mention in the other answer: if it's a deep in the money option, you can actually put a bid < stock price - exercise price - trade fee and hope for the best since the market makers rarely bid above stock price - exercise price for illiquid options, but it's unlikely that you'll beat the market makers + hft.  They're systems are too fast. I know the philly exchange allows you to put in implied volatility orders, but they're expensive, and I couldn't tell you if a broker/exchange allows for dynamic orders with the equation I specified above, but it may be worth a shot to check out; however, it's unlikely that such a low order would ever be filled since you'll at best be lined up with the market makers, and it would require a big player dumping all its' holdings at once to get to your order. If you're doing a traditional, true-blue covered call, there's absolutely nothing wrong being assigned except for the tax implications.  When your counterparty calls away your underlyings, it is a sell for tax purposes. If you're not covering with the underlying but with a more complex spread, things could get hairy for you real quick if someone were to exercise on you, but that's always a risk.  If your broker is extremely strict, they may close the rest of your spread for you at the offer.  In illiquid markets, that would be a huge percentage loss considering the wide bid/ask spreads. What you want is a cashless transaction. It's part of the normal process. My employer gives me 1000 options at $1, I never need to come up with the money, the shares are bought and sold in one set of transactions, and if the stock is worth $10, I see $9000 less tax withholding, hit the account. No need for me to come up with that $1000. The difference is whether your options qualify as incentive stock options (ISOs), or whether they are non-qualifying options. If your options meet all of the criteria for being ISOs (see here), then (a) you are not taxed when you exercise the options.  You treat the sale of the underlying stock as a long term capital gain, with the basis being the exercise price (S). There is something about the alternative minimum tax (AMT) as they pertain to these kinds of options.  Calculating your AMT basically means that your ISOs are treated as non-qualifying options.  So if your exercise bumps you into AMT territory, too bad, so sad. If you exercise earlier, you do get a clock ticking, as you put it, because one of the caveats of having your options qualify as ISOs is that you hold the underlying stock (a) at least two years after you were granted the options and (b) at least one year after you exercise the options. It really depends.  If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains.  If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale.  Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth.  That is the answer in a nut shell.  It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios. "I think the question, as worded, has some incorrect assumptions built into it, but let me try to hit the key answers that I think might help: Your broker can't really do anything here.   Your broker doesn't own the calls you sold, and can't elect to exercise someone else's calls. Your broker can take action to liquidate positions when you are in margin calls, but the scenario you describe wouldn't generate them:  If you are long stock, and short calls, the calls are covered, and have no margin requirement.  The stock is the only collateral you need, and you can have the position on in a cash (non-margin) account.   So, assuming you haven't bought other things on margin that have gone south and are generating calls, your broker has no right to do anything to you. If you're wondering about the ""other guy"", meaning the person who is long the calls that you are short, they are the one who can impact you, by exercising their right to buy the stock from you.  In that scenario, you make $21, your maximum possible return (since you bought the stock at $100, collected $1 premium, and sold it for $120.  But they usually won't do that before expiration, and they pretty definitely won't here.  The reason they usually won't is that most options trade above their intrinsic value (the amount that they're in the money).    In your example, the options aren't in the money at all.   The stock is trading at 120, and the option gives the owner the right to buy at 120.* Put another way, exercising the option lets the owner buy the stock for the exact same price anyone with no options can in the market.  So, if the call has any value whatsoever, exercising it is irrational; the owner would be better off selling the call and buying the stock in the market." Typically, the discount is taxable at sale time But what about taxes?  When the company   buys the shares for you, you do not   owe any taxes. You are exercising your   rights under the ESPP. You have bought   some stock. So far so good. When you sell the stock, the discount   that you received when you bought the   stock is generally considered   additional compensation to you, so you   have to pay taxes on it as regular   income. Source: Turbotax.   Second source. Your pretax rate of return would be: 17% (100/85) In your scenario where the stock price is fixed at $100. Your tax rate would be your marginal rate.   If the stock stayed at 100, you would still be taxed as income on $15/share (the discount) and would receive no benefit for holding the stock one year. Assuming you are in the 25% tax bracket, your after tax rate of return would be 13% ((15*.75)+85)/85) There are some nuances with HCE definition. To answer your questions. It's compensation as defined by the plan. Usually it's gross comp, but it can exclude things like fringe benefits, overtime pay, commissions, bonuses, etc. The compensation test is also a look-back test, meaning that an EE is determined to be an HCE in the current year if their compensation in the previous year was over the limit. I'm not sure how stock options affect this, but I expect they would be counted. Probably have an ESOP plan at that point too which is a whole other can-o-woms. The 5% owner test applies to the current year and also has a one-year look-back period. If at ANY point, even for a day, an employee was more than 5% owner, they are HCE for that year and next. Yes there is a limit. A company may limit the amount of HCE's to the top 20% of employees by pay like Aganju said. They can also disregard employees that may otherwise have been excluded under the plan using statutory exclusions. Example, they can disregard employees under 21 years and with less than 1 year of service. Hahaha, the IRS does not like to concisely define things. You can look here, that's probably as concise as you'll get. Hope this helps! The question seems to be from the point of view actual sales and not its impact on one's taxation. In case you just want to sell, why brokers will respond differently each times. Either there may be issues with ownership and/or the company whose shares it is? In case you feel that the issues lies with brok 83(b) election requires you to pay the current taxes on the discount value. If the discount value is 0 - the taxes are also 0. Question arises - why would someone pay FMV for restricted stocks? That doesn't make sense. I would argue, as a devil's advocate, that the FMV is not really fair market value, since the restriction must have reduced the price you were willing to pay for the stocks. Otherwise why would you buy the stocks at full price - with strings attached that could easily cost you the whole amount you paid? You should get a 1099-MISC for the $5000 you got.  And your broker should send you a 1099-B for the $5500 sale of Google stock. These are two totally separate things as far as the US IRS is concerned. 1) You made $5000 in wages. You will pay income tax on this as well as FICA and other state and local taxes. 2) You will report that you paid $5000 for stock, and sold it for $5500 without holding it for one year. Since this was short term, you will pay tax on the $500 in income you made. These numbers will go on different parts of your tax form.  Essentially in your case, you'll have to pay regular income tax rates on the whole $5500, but that's only because short term capital gains are treated as income.  There's always the possibility that could change (unlikely).  It also helps to think of them separately because if you held the stock for a year, you would pay different tax on that $500.  Regardless, you report them in different ways on your taxes. Did you read what I wrote? I sold some stock for a gain, that's a taxable event.  Are you trying to say I just shouldn't have sold it? Do you understand investing at all?   And the second point is moot, I still had to pay the tax, having write offs doesn't change the fact that my taxes were higher(more importantly that they would have been much higher if I couldn't take advantage of capital gains.) You're talking about NQO - non-qualified stock options. Even assuming the whole scheme is going to work, the way NQO are taxed is that the difference between the fair market value and the strike price is considered income to you and is taxed as salary. You'll save nothing, and will add a huge headache and additional costs of IPO and SEC regulations.