W-2 box 12 code V.

What code V means

IRS description: Code V: Income from the exercise of nonstatutory stock option(s). Show the spread (that is, the fair market value (FMV) of stock over the exercise price of option(s) granted to your employee with respect to that stock) from your employee's (or former employee's) exercise of nonstatutory stock option(s).

When you exercise a nonstatutory stock option, the IRS treats the spread as pay from the employer. The employer reports it in box 12 with code V and also includes it in boxes 1, 3 (up to the Social Security wage base) and 5, so it is taxed like wages and appears in the normal totals. Code V is a memo line for your records, not an extra income entry.

The IRS notes the requirement does not apply to a statutory (incentive) stock option exercise, or to selling shares acquired through one. Those follow different rules. When you later sell shares from a nonstatutory exercise, the sale is a separate event; ask your broker or tax preparer whether your cost basis reflects the amount already taxed as wages, which is why the code V figure is worth keeping.

Where code V shows up on your W-2 and return

• Box 1: included. The spread is taxed as ordinary wages.
• Boxes 3 and 5: included, with box 3 stopping at the 2026 Social Security wage base of $184,500.
• Form 1040: nothing extra on the wage line. Use the box 1 total.
• Later sale: a sale of the shares is a separate event. Keep the code V amount so the basis on the sale is not understated.

Worked example

You exercise 1,000 nonstatutory options at $8 when the stock is worth $20. The spread is 1,000 × ($20 − $8) = $12,000, and the W-2 shows V 12000.00. That $12,000 is already inside your box 1. If you sell the shares the same day at $20, there is no further gain; if you hold them and sell later at $26, the extra $6 per share is a separate gain on the sale.

Limits and what to check

Code V has no limit, but it can push you over the Social Security wage base: box 3 stops at $184,500 for 2026 while box 5 has no cap, so a large exercise can make box 5 much larger than box 3. A big exercise can raise your tax for the year, so compare the federal tax withheld in box 2 to your expected tax before filing. The IRS refers readers to Publication 15-B for the taxability of employee stock options. If the code V amount does not match your exercise confirmation, ask equity administration which fair market value and date they used.

Common mistakes

• Adding code V to box 1. It is already there.
• Using code V as your basis for an incentive stock option. The code covers nonstatutory options only.
• Forgetting the sale. The later sale of the shares is reported separately by your broker.
• Not checking withholding after a big exercise. The spread can raise your tax for the year.

See every code in one searchable table on the W-2 box 12 codes lookup.

Sources

Primary sources opened on November 1, 2026. The plain-English parts of this page are our summary of them, not IRS guidance.

• IRS, General Instructions for Forms W-2 and W-3 (2026), Box 12, Codes (read 2026-11-01): code V definition, the statutory-option exception and the box 1, 3 and 5 rule
• IRS, Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits (read 2026-11-01): the IRS pointer for the taxability of employee stock options