Nonqualified Stock Options Demand Tax Planning Attention

Posted by Kim Chen on October 27th, 2017

If you work for a corporation, you might receive nonqualified stock options (NQSOs). If the stock appreciates beyond your exercise price, you can buy shares at a price below what they’re trading for. NQSOs create compensation income taxed at ordinary-income rates on the “bargain element” (the difference between the stock’s fair market value and the exercise price) when exercised, regardless of whether the stock is held or immediately sold. You may need to make estimated tax payments or increase withholding to cover the tax. Have questions about NQSOs? Contact us.