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February 24, 2023
Question

How do I enter my NQSO stock sales as qualified for Section 1202 reduced capital gains?

  • February 24, 2023
  • 1 reply
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My company sold this year and I received payout. About half of my NQSO transactions qualify for reduced capital gains under section 1202. Can't find a way to mark these as such.

1 reply

February 24, 2023

Here's how to enter a qualified small business stock exclusion under section 1202 in TurboTax Online:

  1. If you don’t see 2022 TAXES in the left pane, select the dropdown to the right of Income & Expenses on the Hi, let’s keep working on your taxes! page and then select Let’s get started, Pick up where you left off, or Review/Edit
    • Otherwise, in the left pane, select Federal, then Wages & Income (This is labelled Income & Expenses in TurboTax Self-Employed)
  2. Scroll down and select the Show more dropdown to the right of Investments and Savings
  3. Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B), then select Start or Revisit
  4. Select Add investments
  5. On the Let's import your tax info screen, select Enter a different way
  6. On the OK, let's start with one investment type page, select the Stocks, Bond, Mutual Funds box, then Continue
  7. Enter relevant account information, then on the Tell us about the sales on your 1099B screen, answer Yes to Do these sales include any employee stock?  Answer Do you have more than three sales on your 1099B? appropriately, then select Continue
  8. On the We strongly suggest entering sales one by one page, select Enter one by one
  9. On the Now, enter one sale on your 1099B screen, enter your information.  Select Nonqualified stock options (NQSO) in the dropdown below What type of investment did you sell?  Check the box next to The cost basis is incorrect or missing on my 1099-B, then select Continue
  10. On the Adjust your cost basis to ensure your best outcome screen, select the box next to I found my adjusted cost basis, then enter your cost basis in the Adjusted cost basis box, then select Continue

The transaction will reflect your corrected cost basis.

[Edited 2/24/2023 |9:48 am PST]

@amharney