Non-qualified stock options (NSOs) are a very popular way to compensate employees at publicly traded companies, and a wonderful benefit to receive. But the tax consequences, and how to handle them, can be confusing.
How you handle an NSO grant should depend on your personal financial situation: your objectives, your tax situation, your cash needs, the rest of your portfolio, etc. Managing your NSOs thoughtfully can lead to a huge tax savings over time. Managing them haphazardly can lead to an unwanted (and unneeded) bill to the IRS.
This post will cover how NSOs are taxed, and a few questions you should ask yourself before deciding how to handle them.