For nonstatutory options without a readily determinable fair market value, there’s no taxable event when the option is granted but you must include in income the fair market value of the stock received on exercise, less the amount paid, when you exercise the option.

How do I report non statutory stock options?

Report the option on your 1040 as income at the appropriate time — after you receive it or after you exercise it. You’ll see the amount listed on your W-2 if you’re an employee, or on a 1099 form for non-employees. Add the original purchase price to the taxable income you reported on the option.

When to include nonstatutory stock option in income tax return?

Nonstatutory Stock Options. If your employer grants you a nonstatutory stock option, the amount of income to include and the time to include it depends on whether the fair market value of the option can be readily determined.

When is an employee granted a non-statutory stock option?

It is important to recognize that there are different rules with regard to tax consequences when an employee is granted a non-statutory stock option and when the employee purchases the shares underlying the option through his exercise of that option. These are set out below.

When to use nonstatutory stock option ( NSO )?

What Are Nonstatutory Stock Options? Nonstatutory Stock Options (NSOs) are also known as Non-Qualified Stock Options (NQOs). They are typically used by more mature companies for higher-paid employees (as well as contractors, consultants and other non-employees, if companies want to give them more than $100,000 worth annually).

How to determine if a stock option is taxable?

Refer to Publication 525, Taxable and Nontaxable Income for assistance in determining whether you’ve been granted a statutory or a nonstatutory stock option. If your employer grants you a statutory stock option, you generally don’t include any amount in your gross income when you receive or exercise the option.