How do I report stock options on my taxes?

Tax treatment depends on the option type. Non-qualified stock options (NSOs) create ordinary income when exercised (the spread between grant price and fair market value). Incentive stock options (ISOs) have no regular tax at exercise but may trigger Alternative Minimum Tax (AMT). Both create a cost basis for future capital gains calculations. Your employer should report NSO income on your W-2; ISOs are reported on Form 3921.