Marilyn Renninger
You're ready to delve deeper into 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.
Tom Davison
Even under President Barack Obama, the Bush administration's 2003 tax cuts and later extensions will continue to affect tax strategies for NQSOs, ISOs, and restricted stock. Unless these tax laws change soon, many of them will persist through 2010.
Internal Revenue Service
This IRS publication explains the tax treatment of many kinds of income, including that from NQSOs, ISOs, and restricted stock/RSUs.
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The full spread is included in your gross income for the year of exercise as ordinary income...
All exercises with an exercise date in 2009, and all restricted stock with a vesting date in 2009, will be included in 2009 taxes and on your W-2 for 2009, and will count...
Capital gains tax applies on the amount of your gains above...
Yes. The spread at exercise of an NQSO is "wages" for purposes of...
There is a federal tax (called FUTA) to help fund unemployment benefits. FUTA is imposed on...
Many states, along with some counties and cities, impose...
Generally, state and local income taxes are an itemized deduction on your...
Regardless of the amount that is withheld at the time you exercise NQSOs, the final tax is based on the standard tables for ordinary income...
Depending on the aggregate amount of supplemental income for the year, a two-tier rate applies. The withholding rate for supplemental wages that exceed $1 million in a calendar year is...
"Capital gain" is income that arises from the sale of a capital asset. Gain from the sale of shares acquired from option exercise or restricted stock vesting is...
The holding period to determine whether a capital gain is long-term or short-term starts on the...
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...
When you sell the stock at exercise, companies usually calculate the taxable spread with your...
If you do a cash exercise, your employer will require you to make arrangements to pay additional cash to the company to cover the withholding obligation. If...
The IRS has set deposit rules companies must follow. With a cashless exercise, the broker essentially sells the shares that underlie the options at the time of exercise. The broker sends the company cash from the sale of your shares that is equal to the amount required for tax...
Not necessarily. Employers usually withhold federal income taxes at the rate used for supplemental wages...
If you hold stock acquired from the exercise of an NQSO for more than one year, the appreciation is...
The holding period to determine whether a dividend is "qualified" and taxed at the lower 15% rate starts on the date after the option is exercised and the stock is held...
Former employees' transactions, regardless of the reason for termination, follow the same withholding and reporting requirements that apply to...
Most companies base withholding on your employment status at the time of grant. If you work elsewhere or are retired at exercise or vesting, then...
In some ways they are similar, though different if you were an employee at the time of grant. The tax treatment of NQSOs is...
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