Non-Qualified Stock Options (NQSOs)

Non-Qualified Stock Options (NQSOs) are a type of employee benefit allowing workers to purchase company stock at a set price, typically lower than market value. When exercised, the difference between the stock's current market price and the exercise price is treated as taxable income. Unlike Incentive Stock Options, NQSOs don’t meet specific IRS criteria and are taxed as ordinary income. They are a way for employees to share in company growth, but they also come with tax obligations upon exercise, making understanding their timing and implications important for financial planning.