Non-qualified stock options are a great way to incentivize and reward employees and the management of publicly traded companies, and we dedicated today’s episode to exploring the basics. Throughout the episode, Grant reviews how non-qualified stock options work, tax implications, and a few things to keep in mind if you have been granted some. Stay tuned until the end of the episode, where Grant talks about some tax planning opportunities that could help you minimize the amount of tax you have to pay in the long run.

 

Show Notes

[01:26] Introduction – Basics of options trading and how non-qualified stock options work.

[07:33] Important Terms – Grant explains a few crucial terms related to NSO: strike price, fair market value, vesting, grant date, and expiration date.

[11:09] Taxation – How and when NSOs are taxed.

[18:19] Concentration Risk – Why most people exercise and immediately sell when they are granted NSOs and how to objectively look at your company and handle the concentration risk associated with them.

[21:38] Exercise and Cashless Exercise – How the two methods work and things to keep in mind when you decide which one to choose.

[25:52] 83(b) Election – 83(b) election is a provision that comes under the Internal Revenue Code that’s related to NSOs. Grant reviews how it works and how you can take advantage of it.

[31:31] Hanging on to Shares – Grant talks about when to hang on to shares and when to sell immediately.

 

Resources

How Are Non-Qualified Stock Options (NSOs) Taxed?
www.abovethecanopy.us/how-are-nsos-taxed/