Securities & instruments
What is NSO (Non-Qualified Stock Option)?
Stock options without the special tax treatment of ISOs. Spread is taxed as ordinary income at exercise; future appreciation is capital gains.
NSOs (sometimes called NQSOs or non-statutory options) are the simpler tax-treatment cousin of ISOs. At exercise, the spread (FMV - strike) × shares is taxed as ordinary income - the same as a salary bonus. The employer withholds taxes at supplemental rates. The new shares have a tax basis of FMV at exercise; any future appreciation when sold is capital gains. NSOs can be issued to anyone - employees, contractors, advisors, consultants. ISOs can only go to employees.