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ISOs

Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.


ISOs

Incentive stock options carry great potential tax benefits, but their taxation can be complex, especially when the alternative minimum tax comes into play. Browse an overview of this section below, or explore the subtopics to the left. See also the ISO sections of the Tax Center.

Selected Articles

Basics

Incentive Stock Options: What You Must Know To Make The Most Of ISOs And Avoid Costly Mistakes This is premium content

Incentive stock options (ISOs) are potentially quite valuable. However, they are more rule-bound, complex, and risky than nonqualified stock options (NQSOs). In fact, mistakes with ISOs can be quite costly. This article explains the essential facts of ISOs that you must know at the time of grant, before you exercise the options, and when you sell the shares.
Taxes

Stock Option Fundamentals (Part 5): Incentive Stock Option Taxation & Alternative Minimum Tax This is premium content

Learn how and when income from ISOs is subject to taxes, including the alternative minimum tax. You must consider taxes at both exercise and sale to put together an optimal strategy.
AMT Advanced

The Alternative Minimum Tax Sweet Spot: Planning Opportunities This is premium content

If you must pay the alternative minimum tax (AMT), the best move may be to increase income and pay even more AMT! Find out why by reading this surprising analysis.
Show More Selected Articles
Taxes

VIDEO! Incentive Stock Options (ISOs): Taxes

To make the most of incentive stock options (ISOs), you must understand their tax fundamentals, explained by the editor-in-chief of myStockOptions.com in this engaging video.
AMT Advanced

The ISO Tax Trap And The AMT Credit Myth: What To Do Before Exercise And At Year-End This is premium content

The tax reductions of the past few years have brought both good and bad news for holders of incentive stock options. While you may have lower capital gains rates when you hold the shares long enough after exercise, it is harder to avoid the risks of the alternative minimum tax (AMT) and to fully recover any AMT credit.
Taxes

Stock Option Fundamentals (Part 3): Income Taxes And Withholding This is premium content

Here's some advice for financial fitness: take stock of taxes before you exercise! When and how you exercise your stock options can have a major impact on how much tax and which taxes you'll pay.
This is simply a selection of the many articles in this section.
Use the navigation to the left to explore all of the categories in this section.

Selected FAQs

Basics

What are the top 10 questions I should ask about my stock options?

You should know the answers to the following questions. Understanding the topics involved will help you make the most of your stock options and prevent costly mistakes...
Basics

What is an incentive stock option?

An incentive stock option (ISO) is a type of stock option that qualifies for special tax treatment...
Taxes Advanced

How will my broker know which shares to sell? Should I identify them in some way? This is premium content

If you have more than one batch of company stock, you are responsible for providing your broker with enough information to identify which shares to sell. If you do not specify...
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Taxes Advanced

How do I use stock that I own to exercise an option in a stock swap? What is the tax treatment? This is premium content

A "stock swap" or "stock for stock" exercise is a stock option exercise in which the exercise price is paid with shares of company stock you own...
Taxes Advanced

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...
Taxes Advanced

What tax statement will I receive from my broker after a sale of company stock? What key facts should I know about it? This is premium content

Form 1099-B or the equivalent substitute statement is necessary for the accurate completion of your tax return. Five facts you must know about this reporting to avoid tax-return mistakes are...
Taxes Advanced

In the cost basis I use to report sales of company stock on my tax return, what part comprises the W-2 income from stock compensation or an ESPP? This is premium content

When your W-2 income is added to the price you paid for the stock, this is your cost basis on your tax return. The table below presents the compensation portion of your tax basis for all types of stock grants and ESPPs...
Taxes Advanced

The amount of my spread at exercise was not listed on the W-2 that I received from my company, even though I made a disqualifying disposition. Do I report this gain on my tax return, and how will I be taxed? This is premium content

This type of situation, in which the disqualifying disposition does not appear on the W-2, is more likely to occur when...
Taxes Advanced

In what ways can I pay my taxes if I don't have the money to pay them with my tax return?

If you simply lack the funds to pay your income tax, you may want to apply for a payment agreement on the...
Taxes Advanced

Can I use ISO stock to exercise NQSOs? Is this a disqualifying disposition that eliminates the special tax treatment for ISOs? This is premium content

Yes, you can use ISO stock to exercise NQSOs without disqualifying it, as the...
This is simply a selection of the many FAQs in this section.
Use the navigation to the left to explore all of the categories in this section.