Nadex options and Taxes

Discussion in 'Taxes and Accounting' started by Robertwiz, Nov 10, 2014.

  1. Hello, just wondering:

    1. How are Nadex options taxed?

    2. How does reporting work?

    3. Are losses subject to the 3,000 loss limitation that stocks have? In other words, if someone makes 20,000 loses, 10,000, will they be taxed as if they had 17,000 in profits?

  2. xandman


    1256 contracts.

    +1 for the Green folks.
  3. rxtrader


    Anyone able to summarize Robert Green's article into a paragraph or two?
  4. "Nadex issued 1099Bs using Section 1256 treatment
    For tax years 2004 through 2013, Nadex issued direct members a Form 1099-B reporting Section 1256 tax treatment.

    As pointed out in our first blog in this series, Nadex is a domestic board of trade — a category 2 qualified board or exchange (QBE) since it’s a CFTC-regulated “Designated Contract Market”. But that alone is not enough; Nadex binary options still must meet the definition of Section 1256 contracts. In February 2014, Nadex emailed us the following statement: “Nadex has recently been advised by staff of the Commodity Futures Trading Commission that its instruments are considered ‘commodity options’ categorized as ‘swaps.’”

    We feel that Nadex binary options probably don’t qualify for Section 1256
    Nadex binary options don’t seem to meet the definition of inclusion in Section 1256 as either a regulated futures contract or a nonequity option, and they seem to meet the definition of exclusion from Section 1256 as a swap contract."

    Coming to Elitetraders for tax advice also puts you in line for a Darwin Award.

    Ask NADEX what tax reporting they will issue you. 2017 may have gone out or needs to go out shortly.
    EliteThink likes this.
  5. Sig


    I don't think you understand how the $3,000 loss limitation works in any situation, you always net your profits and losses with the only caveat being how you match long and short term losses and gains. In no situation with any investment would you pay taxes as you described.