Would love to hear your perspective on when it makes sense to actually exercise the options. Does it make sense to wait as long as possible before the expiration to minimize capital gains?
Great question! The good news is I plan to discuss this a bit in my next post. The short answer is: it depends on what you're trying to optimize for. If you want to minimize taxes, in the short term, exercise now, but you better feel conviction that your stock is going to be worth something. If you want to delay having to pay taxes, exercise later, but be prepared for a potentially devastatingly large tax bill if your company has done really well.
Cool. I mean, the fact of the matter is that if you have a large capital gain you are going to have a large tax bill either way, but only when you sell the stock I think.. look forward to your insight.
Yeah, that's true, but there are a lot of asterisks to that statement. The big (unavoidable) tax event happens when you sell highly-appreciated stock. There's a different (sometimes-avoidable) taxable event when you exercise your stock. You're reminding me to reread my follow-up post, and make sure I've covered all these points, so appreciate the comments/questions :)
Would love to hear your perspective on when it makes sense to actually exercise the options. Does it make sense to wait as long as possible before the expiration to minimize capital gains?
Great question! The good news is I plan to discuss this a bit in my next post. The short answer is: it depends on what you're trying to optimize for. If you want to minimize taxes, in the short term, exercise now, but you better feel conviction that your stock is going to be worth something. If you want to delay having to pay taxes, exercise later, but be prepared for a potentially devastatingly large tax bill if your company has done really well.
Cool. I mean, the fact of the matter is that if you have a large capital gain you are going to have a large tax bill either way, but only when you sell the stock I think.. look forward to your insight.
Yeah, that's true, but there are a lot of asterisks to that statement. The big (unavoidable) tax event happens when you sell highly-appreciated stock. There's a different (sometimes-avoidable) taxable event when you exercise your stock. You're reminding me to reread my follow-up post, and make sure I've covered all these points, so appreciate the comments/questions :)