ISO Tax Strategy

Due to our large technology client base, we are frequently approached with the following questions regarding ISO stock options (Incentive Stock Options) and AMT (Alternative Minimum Tax):

• My company has granted me ISO stock options. How many should I exercise before I hit AMT?
• If I only have a given amount of cash to pay tax, what is the most I can exercise?
• Are there any tax-saving strategies for me available in these situations?
• Should I then sell the underlying equity? How many share should I sell?
• How will this be affected by share price?
• Should I make estimated tax payments, and if so, how much?
• How are the states affected?
• Can I construct a plan for more than one year of equity vesting, exercises, and sales?
• I am leaving my company & must make an ISO vs. NSO decision

These (and more) are all common scenarios that we compute for the clients.

The best method to numerically compute, and plan for, your ISO tax effects is to run a “trial” tax return (or set of returns) directly in the professional software based on the variables you would like to evaluate. This way, you will get a close idea of what to expect during tax time as we will be using the actual forms.

Remember, equity is only one component of your total income, so it often makes sense to consider your other income sources when computing tax obligation.

Contact us at hello@dimovtax.com if you would like to get started with an analysis or to book a verbal consultation to discuss strategy.