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NQSOs

Nonqualified stock options (commonly abbreviated NQSOs) are the most common type of option. Browse an overview of this section below, or explore the subtopics to the left. See also the NQSO sections of the Tax Center.

Selected Articles

Basics

Stock Options 101: The Essentials

Your company has granted you stock options. Now what? This article explains the essential facts that you must know to understand your stock options and make the most of them.
Taxes

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.
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.
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Basics

VIDEO! Employee Stock Options: Core Aspects To Know

With expert insights from the editor-in-chief of myStockOptions.com, this video covers the essential aspects of employee stock options that you must know to make the most of them, including the key concepts of vesting, exercise, and the option term. Running time: 4:12.
Taxes Advanced

12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs

UPDATES! The 2017 tax season has the potential to be confusing if you sold stock last year. This article explains common errors to avoid when reporting stock sales on your tax return and provides helpful guidance on various other tax topics involving stock options and ESPPs.
Taxes Advanced

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, travel for business, or retire, 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.
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...
Taxes

When and how are nonqualified stock options taxed?

You pay taxes when you exercise nonqualified stock options (NQSOs). The taxable income that you recognize is...
Taxes

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...
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Taxes

UPDATES! 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...
Taxes

Is the spread at exercise of a nonqualified stock option subject to Social Security and Medicare taxes? This is premium content

Yes. The spread at exercise of an NQSO is considered "wages" for the purposes of...
Taxes

Too much Social Security tax was withheld. How do I recover the excess amount? This is premium content

When too much Social Security tax is withheld above the Social Security wage base during a calendar year, your recovery approach depends on whether...
Taxes

Is the exercise spread of NQSOs subject to federal unemployment taxes?

There is a federal tax (called FUTA) to help fund unemployment benefits. FUTA is imposed on...
Taxes

Is the spread at exercise of a nonqualified stock option subject to state and local taxes? This is premium content

Many states, along with some counties and cities, impose...
Taxes Advanced

W-2 diagram What will my W-2 show after I exercise nonqualified stock options? This is premium content

The gain from your nonqualified stock option exercise(s) is totaled on the W-2 with other income in the following boxes...
Taxes Advanced

May I have my employer withhold more taxes upon my exercise of an NQSO than the minimum required amount? This is premium content

Your actual tax bracket may be higher or lower than the mandatory federal withholding rate. Whether your company can withhold more depends on...
Taxes Advanced

What is backup withholding? How do I prevent it or recover it? This is premium content

Backup withholding is a form of tax withholding on income from stock sales, along with interest income, dividends, or other types of payments that are reported on Form 1099. Your brokerage firm is required to make backup withholding if you are...
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.
NQSOs

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.