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Slash future taxes on nonqualified options

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in Small Business Tax

As one of your firm’s heavy hitters, you may be granted stock options as part of your compensation package. Which type of option do you receive? It can make a big tax difference in the long run.

Here’s why: With a qualified option (also called an “incentive stock option”), you can benefit from tax deferral and favorable capital gain treatment when you sell the stock. Conversely, nonqualified options are taxable as soon as you exercise them.

But you can take advantage of a special tax opportunity for nonqualified options that isn’t available to qualified option holders.

Strategy: Transfer nonqualified stock options to low-bracket family members. This move can save both income tax and estate tax in the future. Unlike a qualified stock option, you‘re allowed to hand over ownership rights to a nonqualified option from the get-go.

Here’s the whole story: Generally, a nonqualified option is taxable when it is granted ...(register to read more)

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