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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15457
Experience:  15years with H & R Block. Divisional leader, Instructor
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MA DOR Question: if my W2 form includes the stock options awarded

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MA DOR Question: if my W2 form includes the stock options awarded plus the income received from exercising the options, and it's all considered income on the W2, how do I address the Capital Gains?
For instance, I exercised $69k in options, plus I was awarded $30k in new options. both were included in W2.

Do I:
A. leave the $69k as straight income, taxable at the income tax rate?
B. Calculate the Capital Gains Tax, then subtract the amount paid in income tax from the capital gains tax?
C. Calculate Capital Gains tax against the total options exercised?

Robin D :

Hello and thank you for using Just Answer,
First you would report your W2 as you normally would. You would also report the sale of the stock (the exercise) on the Schedule D. You will use the date of the exchange as the sale and the purchase date. Report the sales proceeds as the sale price (sales proceeds should be on the 1099B you received).
Add any fees to exercise and that is the cost you use on the Schedule D. Normally most people have a small loss to claim at completion of the Schedule D due to the cost of the exercise.

Robin D :

The tax is already applied on the W2 so do not list it any where else.

Customer:

So there is no additional tax required other than the W2 at this time?

Robin D :

Correct. The W2 because of teh cashless exchange used, shows the tax that was paid on the increase to your income.

Robin D :

Some people do not like cashless exchange because FICA is also paid but no lay out of money on the side of the employee is pretty good deal.

Customer:

Thanks for your quick and valuable response.

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