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Split ISO Exercises between December and January

Minimize Taxes by Splitting Your ISO Exercise between December and January

Incentive Stock Options (ISOs) are eligible for favored tax treatment which means they are not subject to withholding tax upon exercise like NSOs. However, they are subject to Alternative Minimum Tax (AMT) if the size of your exercise is beyond the exemption limit. If you happen to be at the end of the current tax year and you just eclipse the exemption limit, then consider exercising just enough in December to stay below the limit. Incentive Stock Options (ISOs) are eligible for favored tax treatment While exercising the rest in January of next year to take advantage of a fresh exemption limit. However, 409A updates to the Fair Market Value of your stock are often triggered at the end of a year so waiting until January could result in a higher FMV on your deferred exercise. That could mean triggering some taxes albeit delayed until the following April. If that is a concern, ask company officials about when they plan to do a 409A update since most startups only do them following new rounds of financing.

See this link for more ways to save money on stock options. Feel free to contact the ESO Fund for assistance in funding your stock option exercise while not having to face the financial risk of investing in a startup.

Why You Should Negotiate Your Stock Option Grant

Stock option grants come hand in hand with working for private, venture backed companies and are often the most lucrative of the incentives offered - yes even more than catered lunch and cold brew . However, one of the biggest questions faced by prospective new hires is if the equity package on the table is a fair one. Unfortunately, unlike salary information that is democratized through popular websites such as Glassdoor and LinkedIn, there is no public repository of equity grant informati

Exercise ISOs in January to Save Money

When is the best time to exercise ISOs? ESO experts know the best time to exercise ISOs.

What Happens When Employee Stock Options Expire In-The-Money?

One of the best ways venture-backed start-ups attract and retain great talent nowadays is by offering stock options packages as compensation or as part of their remuneration.

This provides a great option for employees by exercising and ultimately selling their options at a higher value than their

Net Exercising Your Stock Options

Net exercising is essentially a cashless exercise where you tally up the total net value of your stock options based on the number of vested shares multiplied by the spread between the current Fair Market Value (FMV) and your exercise price(s). That total value is then divided by the current FMV to determine how many shares you get to keep. This total value is then taxable to you at ordinary income tax rates. Since your stock isn't actually liquid yet, the tax obligation from a cashless exe

How Will the 2018 Tax Reform Affect Your Stock Options?

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)

Get Your Answers Today

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 want to get a loan so I can early exercise all of my stock options upon receiving them in order to avoid the Alternative Minimum Tax (AMT). How do I do this?

Avoid ISO Payroll Taxes

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

Avoid Triggering $100K Limit on an M&A

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 [epq-quote align="alig

Differences ISO vs. NSO

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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

Minimize Taxes by Splitting Your ISO Exercise between December and January

When is the best time to exercise ISOs? ESO experts know the best time to exercise ISOs.

Qualified Incentive Stock Options (ISOs)

1. Definition

2. AMT or Ordinary Income Tax

ESO Fund takes the risk out of exercising stock options