ISOs
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ISOs

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

Taxes Advanced

ISOs: Tax-Return Tips And Traps This is premium content

Tax reporting with incentive stock options (ISOs) can be tricky. Learn what you need to report on your return at each stage of your ISO's life cycle.
Taxes

Incentive Stock Options: 5 Key Points 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 presents five key aspects 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.
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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.
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.
Basics

Stock Options Made Simple: Comparing NQSOs & ISOs This is premium content

Stock options rose to fame in the 1990s. Even on the TV sitcom Seinfeld, Elaine got lucrative stock options and couldn't stop talking about them (provoking George's resentment, of course). Options remain a major form of employee equity. This article compares the two types and how they work.
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...
Basics

In brief, how do nonqualified stock options and incentive stock options differ?

Companies in the United States can grant two types of stock options: nonqualified stock options (NQSOs), the most common type, and incentive stock options (ISOs). The table in this FAQ summarizes and compares the major traits...
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Taxes Advanced

What is the tax treatment of ISOs after death? This is premium content

For estate-tax purposes, unexercised incentive stock options (ISOs) are treated like NQSOs. But ISOs receive more favorable tax treatment at exercise than NQSOs do. Your heirs or estate get...
Taxes Advanced

Form 8949 and Sch. D diagrams After I have met the ISO holding periods, how do I report a sale on my tax return? This is premium content

After you have held the stock more than two years from grant and one year from exercise, the spread between the exercise price and the sale price is...
Taxes Advanced

What tax treatment applies after ISOs are converted to NQSOs? This is premium content

To have beneficial tax-qualified status, grants of ISOs must have certain characteristics and must follow...
Taxes Advanced

What are the biggest mistakes related to stock options I can make on my tax return, and how can I avoid them? This is premium content

It is all too easy to make costly tax-return errors that attract unwanted IRS attention. Learn how to prevent mistakes in the 2020 tax season...
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

UPDATES! What are some major issues to be aware of when reporting stock sales on my tax return? Why have these issues arisen?

Major changes have occurred in tax-return reporting in recent years, making accurate tax-return reporting more complex and difficult...
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

How have IRS Form 1099-B and cost-basis reporting changed for sales of stock acquired from my stock options, restricted stock, or ESPP? What do I need to do differently? This is premium content

If you sold shares during the calendar year, your brokerage firm will issue IRS Form 1099-B by mid-February of the following year. This is an important document that you must have to complete your tax return for the year of sale...
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.
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