Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 4
Is the AMT a lower percentage for smaller amounts versus larger amounts?

Yes. Barely. 26% on AMTI under $175k, 28% on amounts over $175k.

In other words, would it be less expensive if we cashed in let's say $100k per year, over five years, versus $500k all in one year? Is the AMT a set percentage regardless of amount therefore we should be indifferent?

The only way to know this is to run the numbers for your particular situation. Unfortunately, there is no good rule of thumb.

I'd project your taxes over the next 5 years without the option exercise, then run it again with the exercise all at once, and once more with the exercises spread out over the 5 years. That will give you some idea of your potential tax hit and whether spreading the exercises out over a period of time will save you any significant taxes.

Also keep in mind the investment risk you take by not exercising. If the value of your company stock goes down in the future, the drop in value could easily overwhelm any tax savings you might see. Then again, exercising now might cut you off from any future appreciation in the stock (if you immediately sell the stock, that is).

What I'm saying is that exercising your stock options is more of an investment decision than a tax decision. That's not to say you should ignore the tax impact of exercising - you really do need to know what that will be. But don't let a few dollars of taxes one way or the other keep you from doing what you need to do from an investment perspective.

--Peter
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.