Contact UsWhen considering Employee Stock Option Plans there are two types of stock options:incentive and nonqualified stock options. What are the major differences of these two plans in how they are taxed?
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Tax Professional Answers
Michael Wu
Incentive stock option (ISO) can only be granted to employees and limited at $100,000 per person, and unless there is disqualified disposition (stock sold within 2 years from the grant date or 1 year from the exercise date), the gain is treated as capital gain for the employees, and no deduction for the company unless it is disqualified disposition.
Nonqualified stock option (NQS) can be granted to employees and non-employees such as contractors and board members. The exercise of NQS is a taxable event for the employees, and company gets tax deduction when employees exerice the options.
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572 weeks ago
Nonqualified stock option (NQS) can be granted to employees and non-employees such as contractors and board members. The exercise of NQS is a taxable event for the employees, and company gets tax deduction when employees exerice the options.