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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 are nonqualified stock options taxed?

You are taxed when you exercise nonqualified stock options and thus acquire the underlying shares of your company's stock. The difference between the market price of the stock at exercise and your exercise price is...

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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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.