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Tax obligations when exercising options

Jennif102'sJennif102·Dec 06, 2021
Posted in:Money

Hi all!

I left a company late last year, exercised my ISOs before they expired early this year, and now I'm wondering if I will have a tax obligation this year as a result and what it might be?

The exerices price was very low when compared to the current fair market value. So do I have to pay a tax on the difference, or only when I sell?

I still have all shares in my posession.

Thanks!

teresaman'steresaman·Dec 07, 2021
It's best to calculate any potential AMT taxes (since there is a difference in FMV) via online calculators to make sure you're getting the correct exemption amount. Carta has a simulator if you're using that platform, otherwise this also came up in my search: https://coda.io/@rohit-divate/have-start-up-equity-dont-forget-about-amt (disclaimer: I haven't used it before)
Charlette127·Dec 07, 2021
Since they are ISOs, the "income" from that price difference is only used to calculate whether or not you have to pay tax under AMT. AMT uses different calculations than normal taxes.You may not have to pay extra, but when you do certain things such as exercise and hold ISOs, you have to use form 6251 to find out. When you sell the shares, that will impact your regular taxes.
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