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Exercising options is also a taxable event. If the difference between your strike price and fair market value at time of exercise is large enough you can find y
by iandanforth 5y ago
Exercising options is also a taxable event. If the difference between your strike price and fair market value at time of exercise is large enough you can find yourself in AMT land where you have to pay the tax on "profit" that you can't access because you've purchased an illiquid asset.
- khuey 5y agoYes but with options you have the option (heh) to control when and even whether you exercise (and thus pay the taxes). Options are a bad deal compared to RSUs in a lot of ways but this is their one big upside.
- dhosek 5y agoIt gets worse than that. During the dotcom bubble pop, a lot of people ended up paying taxes on profit that was actually a loss because the stock value tanked after exercising. There were multiple cases of employees owing more in taxes than the value of their stock.
- plorkyeran 5y agoThe whole point of options is to let you defer exercising until it's not an illiquid asset (which is why the 90 day exercise window is a problem).