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How are sold options taxed in Canada? The basics

For most individual investors in Canada, premium from writing an option is usually treated as a capital gain. If you're assigned, the premium adjusts the shares' cost or sale price instead. This is general information, not tax advice.

Options guide · 9-minute read · Updated 2026-10-27

The short answer

This is general information, not tax advice; check with a tax professional or your broker. In a regular non-registered account, the basics usually work like this for an individual investor:

• You write an option and it expires: the premium is generally a capital gain in the year you received it.
• You buy it back: the premium minus what you paid to close is a capital gain or loss.
• A put you wrote is assigned: the premium lowers the adjusted cost base (ACB) of the shares you bought.
• A call you wrote is assigned: the premium is added to your proceeds from selling the shares.

Only part of a capital gain is taxed. That part is set by the inclusion rate, which is one-half for individuals at the time of writing. Check the current rate on CRA's site.

In a TFSA, gains are generally not taxed. In an RRSP, nothing is taxed until you withdraw, and withdrawals are taxed as regular income.

Capital gains or business income?

The biggest question in Canada isn't about options at all. It's about you.

If you're an investor who trades now and then, gains are usually capital. Only part is taxable, and losses can offset other capital gains.

If your trading looks like a business, CRA may treat gains as business income. Then the whole gain is taxable, and losses are business losses. CRA looks at things like:

• How often you trade, and how long you hold.
• How much time you spend on it.
• Your knowledge and experience.
• Whether you use borrowed money.
• Whether trading is a main source of your earnings.

There's no single test. Running the wheel strategy every month on many names could look more like a business than buying a few stocks a year. If you're unsure which side you're on, this is the question to bring to a tax professional.

A worked example through one wheel cycle (an illustration, not a trade idea)

All numbers are made up, in Canadian dollars, for a capital-account investor in a non-registered account.

March. You sell one $45 put on a made-up stock, XYZ, for $1.00 ($100).

April. You're assigned. You buy 100 shares at $45. Your ACB is $4,500 − $100 = $4,400.

May. You sell one $47 covered call for $0.80 ($80).

Across a year-end. If you write a put in December and it's assigned in January, the premium may first be reported as a gain for the first year. When it's assigned, the premium moves into the shares' ACB instead, and the earlier year's return may need to be changed. Ask your tax professional how to handle it.

Superficial losses and US-listed options

The superficial loss rule is Canada's version of the US wash sale. If you sell shares at a loss and you, or someone affiliated like your spouse, buy the same shares within 30 days before or after, and still hold them 30 days after the sale, the loss is denied for now. It's added to the ACB of the new shares instead. Options to buy the same shares can count, and so can buying them in your TFSA or RRSP.

For wheel sellers, this comes up when you sell shares at a loss and then sell a new put on the same stock, which gets assigned within 30 days. Plan for it.

US-listed options and shares. Many Canadians trade US stocks and their options. For tax, each amount must be converted to Canadian dollars, generally at the exchange rate on the day of each trade. Currency moves can change your gain or loss. Your broker's tax slips may not do this for you.

TFSA and RRSP

Covered calls are widely allowed in a TFSA or RRSP. Cash-secured puts depend on the broker, and options permissions differ by broker. Questrade, IBKR and Wealthsimple each set their own rules, so check the broker's current help pages. See options approval levels explained and the wheel strategy in a TFSA.

The TFSA point is worth repeating. CRA has said that carrying on a trading business inside a TFSA can make its gains taxable. Frequent option selling in a TFSA is an area to discuss with a professional.

What to keep for tax time

1. Date, strike and premium for every option you write, in Canadian dollars.
2. How each ended: expired, bought back, assigned or called away.
3. The ACB of any shares, with put premiums taken off.
4. Any loss sale followed by a buy, or an assigned put, on the same stock within 30 days.
5. The exchange rate used for each US-dollar trade.

A wheel strategy tracking spreadsheet with these columns makes the T5008 slips and your own records much easier to match. If you also file in the US, or hold US accounts, see taxes on selling options in the US.

Questions