Employer Stock Plans
Chapters in this video
- 0:00 ISOs and the VIP club tax perks
- 1:23 No regular income tax at exercise, but watch for AMT
- 2:15 The 2-year grant and 1-year exercise holding rules
- 4:37 NQSOs and the fast food tax at exercise
- 6:26 ISO versus NQSO side-by-side comparison
- 7:10 ESPPs and the 15% discount with deferred taxation
- 8:18 Rapid-fire exam recap
What this video covers
- Why incentive stock options (ISOs) receive favorable tax treatment only for employees, and the strict exercise price requirement tied to fair market value at grant
- The ISO tax treatment at exercise: no regular income tax, but the spread is an alternative minimum tax (AMT) preference item
- The ISO holding period rules for long-term capital gains: two years from grant date and one year from exercise date
- What a disqualifying disposition is, and how failing either holding period converts ISO gains to ordinary income
- How non-qualified stock options (NQSOs) are taxed as ordinary income on the spread at exercise, with no special holding rules
- Why NQSOs give the employer a tax deduction at exercise equal to the income recognized, while ISOs do not
- How employee stock purchase plans (ESPPs) allow up to a 15% discount with look-back provisions, and why the discount is not taxed at purchase
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