{"id":20625,"date":"2017-06-14T12:00:00","date_gmt":"2017-06-14T12:00:00","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/"},"modified":"2023-08-29T08:38:47","modified_gmt":"2023-08-29T13:38:47","slug":"nonqualified-stock-options","status":"publish","type":"post","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/investments\/nonqualified-stock-options\/","title":{"rendered":"Nonqualified Stock Options"},"content":{"rendered":"<p>Nonqualified stock options (NQSOs) are also known as nonstatutory stock options. You report NQSO income differently than you report income from these:<\/p>\n<ul>\n<li>Incentive stock options (ISOs)<\/li>\n<li>Options granted under an employee stock purchase plan<\/li>\n<\/ul>\n<p>When you receive NQSOs, you usually don&#8217;t recognize income until you exercise the options. You don&#8217;t have total control over the stock. If you don&#8217;t exercise your options within the required time period, you&#8217;ll lose them.<\/p>\n<p>To learn more, see Publication 525: Taxable and Nontaxable Income at www.irs.gov.<\/p>\n<p>However, the option might have a readily determinable market value. If so, you&#8217;ll have to recognize income when you receive the option. Options traded in an open market have market values that are easily determined. (Ex: Traded on the New York Stock Exchange)<\/p>\n<p>When you exercise your options, the difference in these is equal to your W-2 income:<\/p>\n<ul>\n<li>Option price<\/li>\n<li>Fair market value (FMV) on the date you exercised your options<\/li>\n<\/ul>\n<p>Your employer will include that amount on your W-2, Box 1. The code &#8220;V&#8221;will be in Box 12.<\/p>\n<p>The difference between the option price and the FMV when you exercised your option is included in your W-2 income. So, you&#8217;ll have already paid taxes on it. The basis of the stock is the FMV of the stock on the date you exercised the options.<\/p>\n<p>You&#8217;ll use this equation:<\/p>\n<p>Amount you paid + amount included in your income = FMV<\/p>\n<p>You can often do a paperless transaction in which you exercise your NQSOs and sell the stock at the same time. Even though you perform only one transaction, it&#8217;s really two transactions: You exercised your options, and you sold the stock.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nonqualified stock options (NQSOs) are also known as nonstatutory stock options. You report NQSO income differently than you report income from these: Incentive stock options (ISOs) Options granted under an employee stock purchase plan When you receive NQSOs, you usually don&#8217;t recognize income until you exercise the options. You don&#8217;t have total control over the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[24,47],"tags":[],"class_list":["post-20625","post","type-post","status-publish","format-standard","hentry","category-income","category-investments"],"acf":[],"yoast_head":"<title>Nonqualified Stock Options | H&amp;R Block<\/title>\n<meta name=\"description\" content=\"Learn more about reporting non-qualified stock options and get tax answers at H&amp;R Block.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/investments\/nonqualified-stock-options\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta 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