Non Qualified Stock Options Archives

How does the “Strike Price” affect NQSOs?

by Zajac Group | Mar 13, 2026 | FAQ

The strike price is the price at which you can buy the stock. If your strike price is $10 and the stock is trading at $50, your "spread" is $40...

Which is “lower risk,” RSUs or NQSOs?

by Zajac Group | Last updated Mar 16, 2026 | FAQ

RSUs are generally “lower-risk” because they are "full-value" shares. Even if the stock price drops 50%, your RSUs still have 50% of their original value. If the stock price drops...

Does selling NQSOs affect my AMT?

by Zajac Group | Mar 13, 2026 | FAQ

No. Unlike ISOs, NQSOs do not directly trigger the Alternative Minimum Tax. They are treated as regular compensation, making the tax planning much more straightforward.

Can I sell only some of my NQSOs?

by Zajac Group | Mar 13, 2026 | FAQ

Yes. You can exercise and sell in small batches to stay within certain tax brackets or to provide liquidity for specific goals throughout the year.

If I sell immediately, how much tax will be withheld?

by Zajac Group | Mar 13, 2026 | FAQ

Employers are generally required to withhold 22% for federal taxes (or 37% if your supplemental income exceeds $1M). Keep in mind your actual tax bill may be higher depending on...

What is a “Cashless Exercise”?

by Zajac Group | Mar 13, 2026 | FAQ

This is a "sell-to-cover" transaction where your broker sells just enough shares to pay for the strike price and the taxes, and gives you the remaining cash or shares. It...

Why is Exercise and Sell usually better for NQSOs than ISOs?

by Zajac Group | Mar 13, 2026 | FAQ

Unlike ISOs, which have a specific "Qualified Sale" path that avoids ordinary income tax entirely, NQSOs always trigger ordinary income tax on the spread at exercise. The only thing a...

Is there any case where holding NQSOs for LTCG actually pays off?

by Zajac Group | Last updated Mar 13, 2026 | FAQ

If you control unvested NQSO and your company offers an early exercise provision, you can exercise and hold your NQSO, file the requisite 83(b) election, pay the tax due now,...

Why do I control fewer shares after I exercise my NQSOs in a sell to cover transaction?

by Zajac Group | Mar 13, 2026 | FAQ

When you exercise, you have to pay the strike price of the options and statutory tax withholding rates on the gain. Most people use a "sell-to-cover" or "net exercise," where...

Rethinking Whether to Exercise and Hold Non-Qualified Stock Options for Long-Term Capital Gains Tax

by Daniel Zajac, CFP®, EA | Last updated Mar 13, 2026 | Non Qualified Stock Options

When it comes to evaluating strategies to exercise your Non-Qualified Stock Options (NQSOs), what is your best plan of attack? Do you: Exercise and sell all your NQSOs immediately, cashing...

How are NQSOs taxed?

by Daniel Zajac, CFP®, EA | Last updated May 13, 2025 | FAQ

As a general rule, you will be subject to ordinary income tax on the bargain element when you exercise non-qualified options. This amount is often included in your w-2 at...

When are NQSOs taxed?

by Daniel Zajac, CFP®, EA | Last updated May 13, 2025 | FAQ

NQSOs are not taxed when they are granted. An NQSO grant means your company gives you the right (or option) to buy a set number of stock shares at a...