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NQSOs: Basics


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

Marilyn Renninger
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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FAQs (Jump to articles)

What is a "nonqualified stock option"?

A nonqualified stock option, or NQSO, is a type of stock option that does not qualify for...

When is a nonqualified stock option taxed? This is premium content

You are taxed...

How do I determine the amount of income I get from the exercise of a nonqualified stock option? This is premium content

You have income upon exercise of an NQSO...

Will my employer report to the IRS any income from an NQSO exercise?

Your employer will include the amount of the spread at exercise of an NQSO on...

Is the spread at exercise of a nonqualified stock option subject to federal income-tax withholding?

Yes. The spread at exercise is treated as wages and requires...

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Featured FAQs
UPDATED! My company's stock is now essentially worthless because of securities fraud by senior executives. Can I claim a casualty or theft loss on my tax return? This is premium content
A casualty or theft loss would allow you to deduct the lost amount against your ordinary income, subject to some limits. However, Treasury regulations and court rulings would probably stand in your way. Nevertheless, what you can do is...
Can stock grant income affect my eligibility for the Making Work Pay Credit available under the 2009 stimulus law?
Yes. The credit has income limits, so a big enough spike in your income during 2009 from a stock option exercise or the vesting of restricted stock could...
What is the tax impact on me if my company modifies outstanding stock options or SARs, such as by extending the option term? This is premium content
With approval from the board, and perhaps also shareholders, your company can modify outstanding grants in a way that is consistent with its stock plan. However, it should avoid tax pitfalls for you and the company, such as...