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Are Stock Options Considered Income for Tax Purposes?

Learn when stock options are taxed as income and how exercising or selling affects your tax obligations.

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Video transcript

Stock options are generally not considered income until exercised or sold. At exercise, if the market value exceeds the option price, the difference is taxed as income. Consult a tax advisor for specifics.

Questions and answers

  1. When are stock options considered taxable income?

    Stock options are generally considered taxable income when exercised if the market value is higher than the option price.

  2. How is income from stock options calculated for taxes?

    The taxable income is calculated as the difference between the market value of the stock at exercise and the option’s grant price.

  3. Do you pay taxes when you sell stock options?

    Tax treatment depends on the type of stock option and holding period; sales may result in capital gains or ordinary income tax obligations.

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