Non-qualified stock options and incentive stock options are the two types of employee stock options that you may receive as part of your compensation package. While they have some similarities, they also differ, particularly when speaking to how they may be taxed at exercise and upon the final sale of stock.
Wouldn’t it be great if your company stock price only ever went up—especially if you’re participating in its growth through incentive stock options (ISOs)? Unfortunately, that’s not always how the world turns. If the share price goes down instead, you may be bummed to see the value of your incentive stock options is less than what it once was. However, a down stock price might mean that you could score some tax breaks if you exercise and hold some of those ISOs. When the price is down, the move might help minimize alternative minimum tax (AMT).
Who doesn’t love a great tax break? You and I can’t personally reverse a bear market or revise Federal regulations. But we do get to decide when and how to exercise, hold, and sell our incentive stock options (ISOs), dictating whether we have a qualified disposition or disqualified disposition. Why not make best use of your tax-planning powers when you do?
If you are lucky enough to be granted incentive stock options (“ISOs”) as part of your compensation package, it’s important to understand the timeline of events.
Incentive stock options are a type of equity compensation you may receive as part of your overall compensation package. Incentive stock options, or ISOs, allow you to buy company stock at a fixed price for a set period of time, regardless of the current fair market value of the stock. In the best circumstances, incentive stock options can be a tool to generate significant wealth if…
If you have employee stock options, you need to determine what kind you have so you know if a cash or cashless exercise makes sense: incentive stock options (ISO) or non-qualified stock options (NQSO). The differences go far beyond their names. ISOs may provide tax...
Before you do anything with your incentive stock options, you need to get clear on how exercising those ISOs could affect your assets and your cash flow, and what will it cost you in terms of real money. You need to know the cost of exercising your options, for...
The choice of when to exercise your incentive stock options can be a difficult one, with serious implications for financial planning and taxes. When your company is still pre-IPO, that opens up an entirely separate set of concerns that you may need to be aware of. The issues associated with pre-IPO incentive stock options (ISOs) are particularly relevant now, as early-stage companies increasingly find private funding sources and delay the date of their IPO. As the length of time between startup and IPO increases, more and more employees are facing the question of the costs and benefits of pre-IPO ISO exercise.
Incentive stock options (ISOs) are a form of compensation distributed by a company to their employees. Typically, companies use incentive stock options as a vehicle to retain top employees, reward specific milestones or successes or as an incentive when hiring new...
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...
Whether you’re just getting started or expanding your knowledge, here are some resources to get you started.
Understand what you have, what you should consider, and what ultimately matters to you.
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Understand what you have, what you should consider, and what ultimately matters to you.
Get the Ultimate Guide to Incentive Stock Options to better understand your equity compensation.
