Category: Incentive Stock Options

If you have incentive stock options, you’ve likely heard of — and perhaps already paid — the alternative minimum tax. This is the tax due in the years you exercise and hold incentive stock options, or ISOs. You might also be entitled to an AMT tax credit if that’s the case. The AMT credit gives you the ability to get back some or all of the AMT you paid when you sell your incentive stock...

Even though you may pay a higher tax rate by selling your incentive stock options as a disqualifying disposition, you may not want to completely discount the benefits of an exercise and sell quite yet. The alternative, of course, is to earn the right to capture your profit at long-term capital gains tax rates — which are lower than ordinary income. But how do you secure that lower rate? You need a qualifying disposition, which...

Incentive stock options are unique in that the longer you wait to exercise, the costlier it may be to exercise and hold your shares. That’s not because exercising the incentive stock option cost more, as that price is fixed, but because the cost of the alternative minimum tax (AMT) may be higher. One concern with a costlier alternative minimum tax is that it may put additional pressure on personal cash flows to pay that pending...

Ready to exercise your incentive stock options (ISOs)? Then you have many strategies to consider for how and when to take the next steps. Potential plans to implement include exercising well before the ISOs are set to expire, exercising as expiration nears, or exercising on a rolling basis (so you exercise some ISOs each year as part of a diversification strategy). All of these, and more, are viable paths to take. The right strategy for...

No one likes to see a stock they own go down in value. When we buy stock, we hope the price rises so we can earn a profit on our purchase. It’s bad enough, then, when our share prices fall instead. But what’s potentially even worse? Seeing those falling stock prices — and seeing the value of our incentive stock options (ISO) fall with them. A falling stock price may compound your loss on the...

If you try and look up information to learn more about your incentive stock options, most of what you’ll find addresses what happens when you exercise your options — but doesn’t go much farther than that. You may already know that when you exercise your incentive stock options, or ISOs, the value of the bargain element impacts whether or not you will pay alternative minimum tax (or AMT). But what you may not know is...

Incentive stock options are a form of employee compensation that allows you to participate in the appreciating value of a company’s stock price.  A type of stock option that comes with potentially complicated tax scenarios. Similar to non-qualified stock options, incentive stock options (ISOs) allows for the purchase of a stock at a predetermined share price. If the current share price of the stock is above the price at which you can exercise your right...

Finding the best time and best strategy to exercise incentive stock options is difficult. Competing considerations on income tax, investment planning, and financial planning make it difficult to address the best time to exercise incentive stock options (ISOs) with a blanket answer. Some strategies suggest that exercising early may be a good idea, because this is when the impact from the alternative minimum tax, or AMT, may be lowest. Others suggest it’s best to exercise...

When you exercise and hold incentive stock options, it’s very possible that you will be subject to the alternative minimum tax (AMT). This part of the tax code gets complex, making it difficult to understand. One way to think of the AMT is a pre-payment of income tax on exercised incentive stock options — but actually dealing with AMT is a lot more complicated than simply changing the way you think about it. The amount...

If you have incentive stock options, you’ve likely heard the term alternative minimum tax, or AMT. But what is the AMT, and how is it calculated? It’s a type of income tax, but very different than what you may be used to paying. Typically, the calculation of your total income tax due is subject to the rules and regulations of the regular tax law. This regular tax is the commonly-discussed water cooler conversation of which...