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Because the tax treatment for options is far superior, especially if you’re relatively early. You’re paying 40%+ in taxes for RSUs as soon as you vest. If you’
by tempsy 6y ago
Because the tax treatment for options is far superior, especially if you’re relatively early.
You’re paying 40%+ in taxes for RSUs as soon as you vest. If you’re able to early exercise stock at a startup you owe minimal taxes when you join a company and then when you sell you’re just paying long term capital gains taxes which is a lot lower than 40%.
- aqme28 6y agoAs someone who once had a lot of ISOs, I can tell you that is completely untrue in practice. 40% off of liquid RSUs is far preferable to AMT taxes on something that you are unable to sell and may not ever be able to sell.
- tempsy 6y agoit depends on the situation. that’s why you early exercise when possible. if you’re going to wait to exercise after vesting and the out of pocket costs are too high to exercise then it doesn’t make as much sense. but with RSUs it’s just like income, which again isn’t a great tax treatment especially if you live in a state with state income taxes.