How are stock options taxed in New York State?

In New York State, stock options are generally subject to tax when they are exercised and you take ownership of the stock, rather than when they are granted. Here's how different types of stock options are typically taxed:

1. Non-Qualified Stock Options (NQSOs):

When Exercised: The difference between the exercise price and the fair market value (FMV) of the stock at the time of exercise is considered ordinary income and is subject to federal, state, and local income taxes.
When Sold: Any subsequent gain or loss realized upon the sale of the stock is treated as either a short-term or long-term capital gain (or loss), depending on the holding period.

2. Incentive Stock Options (ISOs):

When Exercised: In New York State, exercising ISOs is not taxable. However, the difference between the exercise price and the market value of the stock at the time of exercise may be subject to the Alternative Minimum Tax (AMT) for federal tax purposes but is not considered ordinary income for New York State tax purposes.
When Sold: If you hold the stock for at least one year after exercise and two years from the date of grant, any gain upon sale is typically considered a long-term capital gain. If these holding periods are not met, any gain is treated as ordinary income to the extent it would have been treated as such if the option had been a NQSO.

Key Points:

Residency: If you are a New York State resident, you are subject to New York State taxes on income from stock options, regardless of where the stock is issued.
Non-Residents: Even if you are not a New York State resident, if you earned the stock options based on services performed within New York State, you may still be subject to New York taxes on the income derived from those stock options.
Reporting: Make sure to report the stock options and any income derived from them correctly when filing your state tax return.

Always consult with a tax professional for comprehensive advice tailored to your individual circumstances.