How will the Trump-GOP tax reform affect stock options? The 2018 Tax Cut & Jobs Act may have negatively impacted taxes for employees in the top 2 venture-destinations, California and New York, but the overall changes were for the better. Alternative Minimum Tax (AMT) wasn’t eliminated but then again the threat to tax options at vesting instead of exercise didn’t pass either. Qualified Incentive Stock Options (ISOs) ISOs are still subject to AMT, but the following have a significant impact. The exemptions for AMT have been raised to $70,300 for tax payers filing as individuals or $109,400 for those filingRead More
If you have questions about employee stock options, get your answers today. Scott Chou answers Quora questions such as: Is it wise to exercise my stock options of a private company on a regular basis or should I wait until I leave the company? What is the difference between a strike price and option value of stock shares at a startup? What is the process for exercising ISO’s at a private company? How is the spread calculated for my W2? What is an unvested option? Do startups have any obligation to notify employees of an impending stock option expiration? I wantRead More
At a liquidity event such as an M&A, unexercised stock option grants are typically cashed out for a value equal to the spread between the exercise price and the liquidity price per share net to common stockholders. When the company executes such a payout, it is considered a compensation event and subject to payroll taxes. This includes both the employee’s medicare and social security taxes as well as the employer’s matching portions.When the company executes such a payout, it is considered a compensation event and subject to payroll taxes. However, if the ISO grant is exercised before the M&A eventRead More
If you hold ISOs and your company is acquired, then you may trigger the 100K Limit Rule if your option agreement has an acceleration feature. Suddenly vesting all or more of your unvested options will increase the total number of options you vest for the year. Although your original grant was designed to stay under the 100K Limit, you may suddenly exceed it unintentionally. As a result, some of your ISOs will be NSOs are more expensive since they are subject to ordinary income tax including the Medicare surtaxes.converted to NSOs in order for you to stay compliant. NSOs areRead More
The main differences between ISOs and NSOs all have to do with taxes: 1. Definition More formally known as Qualified Incentive Stock Options (ISOs) aka statutory options and Non-qualified Stock Options (NSOs or NQSOs). The qualification refers to eligibility for special tax treatment. 2. AMT or Ordinary Income Tax When you exercise either stock option, there is a spread between the exercise price and the current Fair Market Value (FMV) that is subject to Tax ISOs receive special tax treatment and are exempted from ordinary income tax on the spread. However, exercising an ISO is subject to Alternative Minimum TaxRead More
We have temporarily closed our physical office due to COVID-19; however, our team will be operating remotely to process all option exercise and liquidity requests.