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 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)
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?
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
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
The main differences between ISOs and NSOs all have to do with taxes:
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