I'm just casually watching your videos (as someone who is trying to maneuver in my fin-tech job) and was surprised Aaron mentioned he's in Foster City! I'm in San Mateo, which is in the same county haha very small world! But I love your videos though and am definitely learning a lot so far! thank you!
Enjoyed your video. In your examples, some exercise prices are greater than $100K. I read somewhere that there is maximum $100K rule on ISO. Is the rule still applied?
The $100K limit can def. be confusing & I'll try to explain it. It says that you can only have $100K worth of ISOs vest in a given year. Any options over that limit are considered NQSOs. E.g. - Your company grants you 40,000 options at a $10 exercise price, and they vest over 4 years. - All of those can be ISOs b/c 10,000 will vest each year & 10,000 x $10 = $100K. Even if the current price goes higher, it's ok b/c the $100K calc is based on the strike price - If your company awards any more options that vest in those years, they have to be NQSOs b/c you've already reached the limit of $100K worth of options vesting in a given year. - Say you go all 4 years w/out exercising anything, there's nothing stopping you from exercising all $400K worth of ISOs at the same time... well, outside of cashflow & the risk involved!
Thank you very much for reply and your explanation. With the options exceed $100k, the exceeded amounts are considered NQSOs. I read somewhere that for MQSOs, taxes are to be paid when options are granted. This is does not make sense to me as options are worth nothing until exercised. In this case, it would be too late to pay taxes. However, I also read somewhere, taxes are to be paid when options are exercised. This makes more sense to me. What are your thoughts?
I'm just casually watching your videos (as someone who is trying to maneuver in my fin-tech job) and was surprised Aaron mentioned he's in Foster City! I'm in San Mateo, which is in the same county haha very small world! But I love your videos though and am definitely learning a lot so far! thank you!
Enjoyed your video. In your examples, some exercise prices are greater than $100K. I read somewhere that there is maximum $100K rule on ISO. Is the rule still applied?
The $100K limit can def. be confusing & I'll try to explain it. It says that you can only have $100K worth of ISOs vest in a given year. Any options over that limit are considered NQSOs.
E.g.
- Your company grants you 40,000 options at a $10 exercise price, and they vest over 4 years.
- All of those can be ISOs b/c 10,000 will vest each year & 10,000 x $10 = $100K. Even if the current price goes higher, it's ok b/c the $100K calc is based on the strike price
- If your company awards any more options that vest in those years, they have to be NQSOs b/c you've already reached the limit of $100K worth of options vesting in a given year.
- Say you go all 4 years w/out exercising anything, there's nothing stopping you from exercising all $400K worth of ISOs at the same time... well, outside of cashflow & the risk involved!
Thank you very much for reply and your explanation. With the options exceed $100k, the exceeded amounts are considered NQSOs. I read somewhere that for MQSOs, taxes are to be paid when options are granted. This is does not make sense to me as options are worth nothing until exercised. In this case, it would be too late to pay taxes. However, I also read somewhere, taxes are to be paid when options are exercised. This makes more sense to me. What are your thoughts?
NQSOs are taxed at exercise. Here's a video I did that goes into further details : th-cam.com/video/gFpqLECfTBs/w-d-xo.html
@@JavaWealth Thank you very much! 🙏