Pennsylvania Taxation of Stock Options

Pennsylvania follows Internal Revenue Code Section 451 in relation to taxability of stock options for personal income tax.

Incentive, statutory, and non-statutory stock options are taxable as Pennsylvania compensation on the earliest of the following dates:

Date of exercise of the option unless there are substantial restrictions; or

Date that substantial restrictions on the option lapse; or

Date of sale of the option.

The difference between the fair market value of the stock on the date of exercise or lapse as applicable and the amount paid by the employee to obtain the option, if any, is the amount subject to Pennsylvania tax when sold before lapse or exercise.