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Tax Center: NQSO Basics

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Check out our podcast and video on the tax forms and reporting rules for stock sales.

Articles

VIDEO! Employee Stock Options: NQSO Taxation

To make the most of nonqualified stock options (NQSOs), you must understand their taxation. Learn the tax basics of NQSOs in this video, which features clear and concise explanations by the editor-in-chief of myStockOptions.com. Running time: 2:58.

Stock Option Fundamentals (Part 4): NQSO Taxation This is premium content

Understand how and when different taxes apply to NQSOs. You need to consider taxes at exercise and at sale to put together a strategy that maximizes the value of your options.

Global Tax Guide To Equity Compensation For International & Cross-Border Employees UPDATES!

The Global Tax Guide explains the taxation of equity awards in 32 countries: stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights, and employee stock purchase plans. The country profiles are regularly reviewed and updated as needed. We do our best to keep the writing lively.
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NEW! Living And Working In Multiple States: Challenges For Mobile Employees In The USA This is premium content

Podcast included! Moving between US states, whether to relocate permanently or simply to travel for business, can involve tax complications for people who have stock compensation. This article presents the tax issues that you may encounter when you leave your home office and cross a state line.

Taxable And Nontaxable Income:
IRS Publication 525

Internal Revenue Service
This IRS publication explains the tax treatment of many kinds of income, including that from NQSOs, ISOs, and restricted stock/RSUs.

FAQs

UPDATES! I have moved from one state to another. What happens with the taxes on my stock options if I live in different states during the period between grant and exercise? This is premium content

Generally, each state you live in determines what income is taxable and when. For administrative ease, many companies...

What are capital gains and capital losses? What are the capital gains tax rates?

Capital gain is income that arises from the sale of a capital asset. Gain from the sale of securities held for investment, such as shares acquired from stock compensation...

How is capital gain calculated?

The amount of your capital gain is the difference between your sales price and your tax basis in the stock. However, with stock from equity compensation, your tax basis can be harder to determine. It is...
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How is the spread at exercise of an NQSO taxed for federal income-tax purposes?

The full spread for a nonqualified stock option is included in your gross income for the year of exercise as ordinary income...

When I hold NQSO shares after exercise, what tax applies when I later sell the stock?

Capital gains tax applies on the amount of your gains above...

Do you have a chart that compares the tax treatment of stock options, restricted stock, RSUs, and ESPPs? This is premium content

gives the types of taxes, when they are triggered, and the tax withholding (if any) for various forms of equity compensation granted in the United States. For details, examples, and illustrations...

Form 8949 and Sch. D diagrams How are capital gains taxed when I sell my NQSO shares? This is premium content

To compute the appreciation since exercise, you take the sales price after commissions and subtract...

My company's stock price has dropped since I exercised my NQSOs. Is there anything I can do to reduce the taxes I owed on the spread at the time of exercise? This is premium content

Since the spread between the exercise and market price for NQSOs is taxed as ordinary income upon exercise, the tax is...

Can the IRS seize stock options or restricted stock under a tax lien? This is premium content

The IRS can seize your stock options if it applies a federal tax lien to you for unpaid taxes. After seizing your stock options, the IRS can also...

What happens if I have a capital gain from one sale of company stock and a capital loss from another sale of company stock or another security? This is premium content

The treatment for tax-loss harvesting is similar to that of owning and selling any two stocks. The income-tax reporting for multiple transactions is...

Are there any stock option or restricted stock strategies for using capital-loss carry-forwards? This is premium content

Tax considerations alone should not drive the choice of what stock you sell. For example, if you are holding appreciated company stock from a nonqualified stock option (NQSO) exercise or restricted stock vesting, you will be taxed on...

If I move to another country to work, will I still have to pay US taxes on option exercises, restricted stock vesting, and stock sales? Can I avoid double taxation? This is premium content

The United States taxes the worldwide income of US citizens regardless of whether the income arises from activities in the US. In addition, the other country may impose taxes too. But the US has tax treaties with certain nations to help taxpayers avoid double taxation...