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Home Q&A Forum What are the tax implications of exercising an option grant?
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Capital Gains Tax

Option Grant

Texas

Asked on Jul 17, 2024

What are the tax implications of exercising an option grant?

I recently received an option grant from my employer, which allows me to purchase company stock at a predetermined price. I am considering exercising the options, but I am unsure about the potential tax implications. I want to understand how exercising the options will affect my taxes, including any potential tax liabilities or benefits, and whether there are any specific rules or deadlines that I need to be aware of.

1 Attorney answer

Answer

Capital Gains Tax

Texas

Answered 42 days ago

Darryl S.

ContractsCounsel verified

Business Lawyer
Licensed in Texas
Free Consultation

This is a really complicated question that depends on a) the kind of options involved (Non-Qualified vs. Incentive Stock Options) , whether you hold or sell the stock you get after exercise. b) The difference between the exercise price (your buy price) and fair market value (sometimes hard to determine if not a publicly traded stock) and c) your tax rate and if you're subject to alternative minimum taxes (gain is usually capital gains taxed rather than ordinary income). This is also best discussed with your tax advisor, rather than a lawyer.

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