NQSOs
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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

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.
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.
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.
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Basics

How To Avoid The Most Common Stock Option Mistakes (Part 1)

Avoid the fumbles others made with options during past ups and downs in the stock markets. Situations where common errors tend to arise can be classed into nine categories, including option-term expiration, job termination, corporate mergers, financial planning, and various life events.
Taxes

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

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.
Basics

Stock Options Made Simple: Comparing NQSOs & ISOs

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 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

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 Advanced

Are there financial-planning strategies for NQSOs? This is premium content

There is no universal planning strategy for nonqualified stock options (NQSOs). It is important for your option strategy to be tailored to your personal goals. With that said, we present some general advice from experts...
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Taxes

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...
Taxes

Too much Social Security tax was withheld. How do I recover the excess amount? This is premium content

When too much Social Security tax is withheld above the Social Security wage base during a calendar year, your recovery approach depends on whether...
Taxes

Is the exercise spread of NQSOs subject to federal unemployment taxes?

There is a federal tax (called FUTA) to help fund unemployment benefits. FUTA is imposed on...
Taxes

Is the spread at exercise of a nonqualified stock option subject to state and local taxes? This is premium content

Many states, along with some counties and cities, impose...
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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