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Financial Planning / Tax Strategies


Subject:  Re: Stock Options Date:  4/26/2019  4:54 PM
Author:  joelcorley Number:  129220 of 129719


You wrote, DH has a limited amount of time to exercise his stock options, now that he is retired. But we are trying to max out Roth conversions up to the 24% bracket and the more money we realize as income the less we can convert. If he buys the stock at the option price, say $30, and the current value is $35, is he taxed on the transaction if we hold the shares for later sale, or would our tax liability simply come when we sell with a basis of $30?

I would think it depends on the type of stock options he was issued.

For Non-Qualified (NQ) options, the spread between the market and strike price is treated as ordinary income. Incentive stock options (ISOs) are more complicated mainly because they offer tax advantages if you hold long-term after you exercise.

- Joel
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