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🇺🇸 US · Equity & optionsNon-qualified stock option (NSO)
Also called: NSO, NQSO, non-qualified stock option
In one line
A standard stock option whose gain at exercise is taxed as ordinary income, with no special tax status.
In plain English
NSOs are the simpler, more common option type. When you exercise, the spread between value and strike is taxed as income right away, like salary. No AMT quirk, but no capital-gains break on that spread either.
If you were explaining it to a 5-year-old
A plain toy voucher with no tax discount — when you use it, you pay normal tax on the bargain you got, just like on pocket money.
Why it matters when you sell
The ordinary-income tax hit at exercise is a real cash cost before you can sell, so it feeds directly into whether exercising-to-sell makes sense.
Related terms
Put it to use
When you're ready to go deeper, there's an optional Equity Toolkit and Report.
Sources
Primary references for this term: US SEC / Investor.gov, IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.
Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.