3 ms·
That’s not accurate at all. To get the 0%, you have to exercise at strike price (only way to do that is to forward exercise your vesting schedule which is in t
by sologoub 7y ago
That’s not accurate at all.
To get the 0%, you have to exercise at strike price (only way to do that is to forward exercise your vesting schedule which is in theory great, but I have yet to see this allowed by a company for normal employees) AND you have to be under a certain threshold of income (39k for single and 78k for married [1]).
So in reality 0% is just not possible for most people with these options.
When you exercise, the spread between strike and fair market value is taxed, whether you sell or not, or even can sell. If the company is private, you have to pay and hope they become public or get sold.
If you happen to live in CA, add some more tax on top of that.
Now, as a founder, where you do not need to use options, the math is different, but still not zero percent.
[1] https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/ https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rate...
- x0x0 7y agoA data point: we allowed this for all our employees (83b for everyone!) and no one took us up on it. It was frustrating because as a founder, I viewed it as a benefit, but employees didn't. At all.
- cco 7y agoMy guess is very few people knew that AMT was a thing and/or didn't have enough liquid cash to buy at the time. Had I know that in a few years I'd have a tax bill in the tens of thousands of dollars I'd have taken a loan out immediately to early exercise all my options and been much better off.