Taxation on Non Qualified Stock Options

Financial Planning Tax Strategies
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We still have a significant number of stock options, which are finally worth exercising. Trying to figure out how exactly these are taxed. In the past we always exercised the options and then sold immediately via cashless sell, of course resulting in tax treatment of short term capital gains taxed as ordinary income. We are looking at buying the stock via our options, using cash on hand for the purchase, then holding for at least a year before selling. Am I correct in assuming that the executing of the options would be a non-taxable event in this case, (since we are not selling any shares immediately to make it a cashless purchase,) and the subsequent sale after holding the shares bought for more than 1 year would be taxed as LT capital gain?

TIA,

IP

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We still have a significant number of stock options, which are finally worth exercising.

What type of options are they? Incentive or Non-Qualified? Here’s an article on the different taxation of the 2 types https://www.thebalance.com/taxation-of-employee-stock-option…

We are looking at buying the stock via our options, using cash on hand for the purchase,

Does your plan allow that? Most of the option plans I’ve seen require you to at least sell enough for tax withholding.

AJ

1 Like
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Non qualified options.

Our plan does allow use of outside cash to exercise the options. Will check on the tax withholding.

IP

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Thanks for the link. Not at all what I was hoping to see.

IP