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Tax implications of stock option

Tax implications of stock option

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Tax implications of stock option

  1. 1. Just like most types of investment packages, when there is gain, it is automatically deemed as revenue or income.  And all types of income are subject to government taxes.  Tax implications of stock option have to be paid and the amount that you need to pay will depend on a number of factors including the classification of stock options you have and the tax rules governing these options. 
  2. 2. For those who are not aware yet, the two basic types of stock options and they are the incentive stock option or ISO and NSO.  The former is given privileged tax treatments and it should follow certain conditions set by the government tax agency.  With incentive stock options, employees are not forced to pay taxes on their stock until the shares are sold. 
  3. 3.    In the event that the stock is sold, capital gains taxes are required to be paid and they are computed against the gains earned. Gains earned is determined by getting the difference between the selling price and the purchase price. This tax rate on stock options is usually lower than traditional income tax rates.

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