NQSOs
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.
NQSOs

NQSOs

Nonqualified stock options (commonly abbreviated NQSOs) are the most common type of option. Browse an overview of this section below, or explore the subtopics to the left. See also the NQSO 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

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

Understand the basic tax-reporting requirements of stock options. This article reviews what you need to report on your tax return.
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.
Show More Selected Articles
Taxes Advanced

How To Report Sales Of Company Stock On Your Tax Return

Form 8949 and Sch. D diagrams! If you sold shares in 2020 that you acquired from equity compensation or an ESPP, you will need to report the sale on the federal tax return that you file in 2021. Learn here what you must know to avoid expensive mistakes and unwanted IRS attention. Our annotated diagrams of Form 8949 and Schedule D can help you make sense of the reporting rules.
Taxes

Stock Option Fundamentals (Part 4): NQSO Taxation This is premium content

Understand 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.
Basics

Stock Options 101: The Essentials

Podcast included! So your company has granted you stock options. Now what? Stock options give you a potential share in the growth of your company's value without any financial risk to you until you exercise the options and buy shares of the company's stock. Before you exercise your options, their built-in value is subject to pre-tax growth—which can be significant. This article explains the essential facts that you must know to understand your options and make the most of them.
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...
Taxes Advanced

Form 8949 and Sch. D diagrams How do I report a sale of NQSO shares on my federal income-tax return? This is premium content

You need to complete Form 8949 and Schedule D for the year of your stock sale and file them with your IRS Form 1040 tax return. You must...
Show More Selected FAQs
Taxes Advanced

Form 8949 and Sch. D diagrams How do I report a sale of shares in an NQSO sell-to-cover exercise? 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...
Taxes

When and how are nonqualified stock options taxed?

You pay taxes when you exercise nonqualified stock options (NQSOs). The taxable income that you recognize is...
Taxes

UPDATES! What is IRS Form W-4 and how does it apply to withholding from stock compensation? This is premium content

IRS Form W-4 determines how much federal withholding tax will be deducted from your paycheck, at least from your salary. You want to submit a new Form W-4 to adjust your withholding whenever your personal or financial situation changes. In 2020, the IRS introduced a revised Form W-4 that...
Taxes

When I hold NQSO shares after exercise, what tax applies when I later sell the stock?

Capital gains tax applies on the amount of your gains above...
Taxes

Form 8949 and Sch. D diagrams How are capital gains taxed and reported when I sell my NQSO shares? This is premium content

To compute the appreciation since exercise, you take the sales price after commissions and subtract...
Taxes

What is capital gain and capital loss? What are the tax rates on capital gains?

Capital gain is income that arises from the sale of a capital asset. Gain from the sale of securities held for investment, such as shares acquired from stock compensation...
Taxes

Is the spread at exercise of a nonqualified stock option subject to Social Security and Medicare taxes? This is premium content

Yes. The spread at exercise of an NQSO is considered "wages" for the purposes of...
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.
We've updated our Privacy Policy, and this site uses cookies. Read the Privacy Policy to learn more.