Non-Qualified Stock Options

Non-qualified stock options (NSOs) are a type of employee benefit that grant you the right to buy company shares at a fixed price in the future. Unlike incentive stock options (ISOs), NSOs don't qualify for special tax treatment. When you exercise NSOs, the difference between the stock's market price and the strike price is taxed as ordinary income. If you sell the shares later, any profit is taxed as a capital gain. NSOs are a way for companies to motivate employees and align their interests with shareholders, but they come with specific tax implications at exercise and sale.