How to Report Non-Statutory Stock Options

How to Report Non-Statutory Stock Options
Stock options are reported as income on a W-2 and Schedule D.

Reporting Steps

Examine Box 1 of your Form W-2. It should be a higher amount than your annual salary. The increase is your income from exercising the stock options. Your employer will provide details on the amount in Box 1 to ensure that it includes salary, plus the difference between the option exercise price and the value of stock purchased on the exercise date.

Enter on Line 7 of Form 1040 the amount from Box 1 of your W-2. Include W-2 income from other employers, including the W-2 of a spouse if you file a joint tax return. Add the income from exercising the stock options if that amount is not already on your W-2.

Record the option exercise date in the first column of the ledger.

Write the market value of the stock on the option exercise date in the next ledger column. Label the column "cost basis."

Keep the ledger as a record of your purchase date and cost basis. Use this to determine taxable gain or loss when the stock is sold.