Daniel Zajac, CFP®

Incentive Stock Options and Executive Compensation

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How and When Are Incentive Stock Options Taxable?

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Incentive stock options are a form of employee compensation that allow you to participate in the appreciating value of a company stock price. Much like their non-qualified stock option cousins, incentive stock options, or ISOs, allow for the purchase of a stock at a predetermined share price. If the current share price of the stock is above the price at which you can buy the share, you have “in the money” shares. But if the current market price of the stock is below the price at which you can buy the shares, you simply do nothing and let …

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4 Questions to Ask If You Have Employee Stock Grants

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Some companies offer employee stock grants as part of a compensation package to help attract, retain, and reward key employees. Both the business and the employee share the hope that the stock price of the company will increase over time, which in turn can increase the success of the business and increase the wealth of the employee. The idea is this mutual benefit can translate into a joint desire to work hard and grow the company. As an employee on the receiving end of stock grants, it’s important to take personal responsibility to …

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How to Do a Year End Exercise of Incentive Stock Options to the AMT Crossover Point

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Finding the best time and best strategy to exercise incentive stock options is difficult. Competing considerations on income tax, investment planning, and financial planning make it difficult to address the best time to exercise incentive stock options (ISOs) with a blanket answer. Some strategies suggest that exercising early may be a good idea, because this is when the impact from the alternative minimum tax, or AMT, may be lowest. Others suggest it’s best to exercise as late as you can. Waiting offers you certainty as to final value of …

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