Stock option question

[Texas97]

Thought that someone might have some insight. I have been working for a large public company for over a year now. I was given stock options as part of the signing bonus. 25% are vested currently and we are above water and I am looking into exercising my option.

What type of tax issues do I face if I were to act on the stock options that I currently have vested, ie, what type of short term capital gains taxes do I face?

Second, is there a way that I can exercise on the options but sit on them for a year to make them long-term?

For me, the stock options is really just a plus. They aren't enough to bank any retirement on, that's for sure. I am getting married in the next few months and could sure use the cash. Further, I prefer better diversity in my investments (ie, index funds).


Texas97

 

[Squirrel]

- 12 months is the short term CG cutoff (didn't that recently change?), so if you've been with them a year and they were a signing bonus, what was the actual award date?
- Many option executions are already reported as part of your income on your W2, and taxes are already taken out (mine are)
- Don't think so - even if you sell to cover, so that you own them outright, you are still excercising them prematurely (if that does end up being the case).

 

[NameAlreadyInUse]

At my company they are treated as income. All normal taxes are withheld from the payout and you get a check that has already been taxed. The income is reported as income on your W2 and that's it. The only thing tax wise you would need to be concerned about is if it bumps you into a higher bracket.

 

[coachkiss]

Find out if they are NSOs or ISOs. Shoot me a PM with your email address, and I will send you a PDF that explains the difference with pretty good clarity.

 

[hookemhookem]

From my experience, I seem to remember most employees got ISO's (incentive stock options, I believe), and NQO's (nonqualified) went to Boardmembers (non-employees), but I have a fairly limited sample size.

ISO's are not taxable upon exercise, but the gain is taxable at the time you sell the stock. This tax is at capital gains rates (which is a good thing)

NQO's are taxable at exercise (bad) at ordinary income rates (also bad).

Someone might wanna double-check that.