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Stock options are not counted as income. They are exactly that: Stock options. Your income is your take-home pay, specifically gross pay on your stub extrapolated to annual salary.

Yes, there is capital income from stocks and other market investments, but appreciation for those comes under capital gains, which are calculated (and taxed) separately, and don’t count as employment income, for good reason: You can’t use stock options vesting in 4 years to buy food tomorrow or pay mortgage next month.



The spread between purchase and grant price for Incentive Stock Options actually is counted towards income for Alternative Minimum Tax.


Which makes it ironic that capital gains taxes can bite exercisers before they are actually able to be liquidated.




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