ISOs
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.
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

12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs This is premium content

Puzzled by what to do with your W-2, Form 1099-B, or Forms 3921 and 3922? Don't quite know how and where to report sales of company stock on Form 8949 and Schedule D? Tax returns involving income from stock options or ESPPs can be confusing. Recent changes in IRS reporting rules haven't helped. This article explains errors and nasty surprises to avoid.
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.
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.
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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 Advanced

IRS Form 3921 For Incentive Stock Options: What You Need To Know, And How It Can Help You Understand ISO Taxation This is premium content

Incentive stock option (ISO) exercises made during a calendar year are reported to you and the IRS on Form 3921 early in the following year. This article explains what you need to know about the information on the form, and how the form can help you better understand the complexities of ISO taxation.
Taxes

Stock Option Fundamentals (Part 5): Incentive Stock Option Taxation And 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.
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

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 2021 tax season...
Basics

What are the top 10 questions I should ask about my stock options?

You should know the answers to the questions in this FAQ's checklist. Understanding the topics involved will help you make the most of your stock options and prevent costly mistakes...
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Taxes Advanced

Form 8949 and Sch. D diagrams How am I taxed if I have made a disqualifying disposition (e.g. sale) of ISO shares in a different year than the year I exercised the option? How do I report this? This is premium content

With ISOs, it is always the sale that triggers taxes. The rules are similar to those that apply to sales of ISO shares made in the same year as exercise; the difference is that...
Taxes Advanced

Form 8949 and Sch. D diagrams How do I report a sale of shares in an ISO sell-to-cover exercise? Is there ISO-related AMT? This is premium content

To report the sale of shares in a sell-to-cover exercise, you complete Form 8949 along with Schedule D for the year of...
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...
Taxes Advanced

NEW! Is there an optimal time during the tax year to exercise incentive stock options? This is premium content

With incentive stock options (ISOs), when you hold the shares for more than one year from exercise and two years from grant, the entire gain at sale over the exercise price is...
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...
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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