FAQs - Employer Withholding

Is Ohio income tax withholding required on qualified stock options - e.g. incentive stock options (ISO) and employee stock purchase plans (ESPP)?

Ohio income tax withholding is required on the amount of income included in wages, as required to be reported in box #1 on federal W-2, resulting from a disqualifying disposition of stock.

However, withholding is not required when an employee, who acquired stock pursuant to her/his exercise of a stock option, holds the shares for the appropriate holding period and then sells the stock. Reason: the gain or loss from the sale is not W-2 wage income.