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My wife gets stock options from Intel. I was just told by another Intel employ that we should cash in the options as soon as they can be exercised because the gain on the options is taxed as income. He said if you want to keep your money in Intel cash in the options and take to stock so the money it makes is taxed as capital gains (20%) vs income which is higher. Is this the way it works?

If I may be allowed a postscript to my first answer to your question ..... I've been thinking about the advice you were given by that other Intel employee: it strikes me that the strategy of cashing in options as soon as they can be exercised, so as to minimize taxes, is comparable to recommending that you ask your boss for "a smaller raise, please, so that I don't have to pay those annoying taxes."

You'd laugh at such advice, right?

Stock option "education pieces" I've seen sometimes refer to options as the equivalent of an interest free loan from the company. If you let it just sit there, it'll keep growing for you. The longer you let it sit, especially with a growth company like Intel, the more it will be worth. If you're planning on just cashing it, therefore, it makes at least as much sense to wait and let it grow to the max.

If, on the other hand, you are hoping to own a piece of Intel, through buying and holding, it may well make sense to exercise the option early in its life, before the market price gets so high that there are either income taxes or Alternative Minimum Taxes on that bargain price.......

Whatever you do, though, make sure you understand the range of choices you have and the consequences of each of them. Stock Options are great builders of wealth, especially when you're with a company like Intel.

some more to think about.

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