Stock Awards vs. ISOs vs. NSOs

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Stock Awards vs. ISOs vs. NSOs

Common questions covered here
How are stock awards taxed compared to stock options?
Are taxes the same for stock options and stock awards when they vest?
Are taxes the same for stock options and stock awards when they're sold?
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Because the differences are so nuanced, what follows is a summary of the taxes on restricted stock awards, ISOs, and NSOs, from an employee’s point of view.

Mary Russell, a lawyer who specializes in equity compensation, recommends each form of equity be used at the appropriate time in private companies: restricted stock awards for the earliest stage of a startup, stock options with longer exercise windows for the early to mid stage, and RSUs for the later stages.*

If you relish tax complexity, you can learn more from:

Taxes on RSUs

If you are awarded RSUs, each unit represents one share of stock that you will be given when the units vest.

  • Here’s the tax summary for RSUs:

  • caution When you receive your shares, you are taxed on their value at that time.* If you are an employee, this means you may have to write a check to the company to cover your income and employment tax withholding. Often, for U.S. employees, companies will withhold the tax in the form of shares such that no action is required by the employee at vesting time.*

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