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Nonqualified: Employees generally dont owe tax when these options are granted. When exercising, tax is paid on the difference between the exercise price and the stocks market value. They may be transferable. Qualified or Incentive: For employees, these options may qualify for special tax treatment on gains.
Non-qualified stock options are more straightforward, as the tax implications at exercise are generally agreed to be easier to understand. Incentive stock options, while more complicated, offer the opportunity for long-term capital gains if you meet the requisite holding period requirements.
Neither the nonstatutory stock option nor the stock-settled stock appreciation right granted to Service Provider with respect to common shares of Service Recipient is a nonqualified deferred compensation plan subject to taxation under section 457A.
You will receive the net proceeds in cash after option exercise costs, taxes, commissions and fees. You may use the proceeds from the stock sale to cover the purchase price, tax withholding and additional fees.
Non-qualified stock options (NSOs) are a type of stock option that does not qualify for favorable tax treatment for the employee. Unlike with incentive stock options (ISOs), where you dont pay taxes upon exercise, with NSOs you pay taxes both when you exercise the option (purchase shares) and sell those shares.

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What Is a Non-Qualified Stock Option (NSO)? A non-qualified stock option (NSO) is a type of employee stock option wherein you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option.
Your employer is not required to withhold income tax when you exercise an Incentive Stock Option since there is no tax due (under the regular tax system) until you sell the stock.
Once you exercise your non-qualified stock option, the difference between the stock price and the strike price is taxed as ordinary income. This income is usually reported on your paystub. There are no tax consequences when you first receive your non-qualified stock option, only when you exercise your option.
Profits made from exercising qualified stock options (QSO) are taxed at the capital gains tax rate (typically 15%), which is lower than the rate at which ordinary income is taxed. Gains from non-qualified stock options (NQSO) are considered ordinary income and are therefore not eligible for the tax break.
The minimum NSO exercise withholding requirement is only 22% for up to $1 million in spread value (37% if over $1 million). Many companies try to estimate the right amount but it isnt very easy. Companies are required to withhold NSO taxes only for employees.

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