Category: Incentive Stock Options

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.

If you have incentive stock options, you may be familiar with the alternative minimum tax (AMT), and potentially the alternative minimum tax credit.  The alternative minimum tax is a complicating factor that may rear its head in a year that you exercise and hold incentive stock options. A key feature of incentive stock options is that, if you do a qualifying disposition, you may be able to claim long-term capital gains rates on the gain...

If you have incentive stock options but haven’t made a plan for them beyond “I’ll figure it out later,” you may want to consider the alternatives, and the alternatives are many. One of the many strategies that you may consider is to exercise some or all of your incentive stock options early. How early depends on many factors, but earlier than a faced expiration date.

Incentive stock options, or ISOs, are a type of employee stock option. Often considered the favorable employee stock option as compared to non-qualified stock options, they may present an opportunity to receive a preferential tax treatment when you exercise and sell the incentive stock option shares. To obtain this preferential tax treatment, you must meet specific rules regarding the timeline between when the incentive stock option is granted, and when you sell your shares. The timeframe between when you exercise the option and when you sell the shares matters, too.

There are two types of employee stock options: incentive stock options, or ISOs, and non-qualified stock options, or NQSOs. Generally speaking, incentive stock options are the more complicated of the two. These complexities may include holding period requirements, potentially preferential tax treatment, and the alternative minimum tax.

Incentive stock options may be offered as part of an employee compensation package. In a best-case scenario, these options can offer an invaluable benefit to you as an employee. You may benefit most if your company offers incentive stock options (or ISOs) at a low exercise price, and then the company stock price increases substantially. For example, let’s say that you receive 1,000 incentive stock options with an exercise price of $10 per share. If...