What the hell is an ISO?

An incentive stock option is a right your company gives you to buy its shares later at a price fixed today — the strike price. If the company grows, you get to buy at the old price and own something worth the new one. That gap is the whole point, and it’s also the thing the tax code is most interested in. ISOs get a treatment that non-qualified options don’t: no regular income tax when you exercise, and a shot at long-term capital gains rates if you hold long enough. The catch is a second tax system called the AMT, which does notice the exercise. More on that two questions down.

Buying the shares. That’s it. You pay the strike price for however many options you choose to exercise, and the company issues you actual stock. Until you exercise, you own an option — the right to buy, not the shares themselves. After, you own stock like any other shareholder, with all the upside and the very real possibility that it stays illiquid for years. Exercising is a cash decision first and a tax decision second, and both deserve to be on paper before you write the check.

The Alternative Minimum Tax is a parallel version of the federal tax calculation. Congress built it decades ago so high earners with lots of deductions would still pay something. Every year your return is computed both ways, and you pay whichever number is higher. For most people the regular system wins and AMT never shows up. ISOs change that: the regular system ignores your exercise, but the AMT counts the spread — the difference between your strike price and the fair market value on the day you exercise — as income, even though you sold nothing and received no cash. Exercise enough and the AMT number climbs past the regular one. That’s the bill people get surprised by. One consolation: AMT paid because of an ISO exercise generally creates a credit you can use against regular tax in later years. It isn’t lost, just early.

A 409A valuation is an independent appraisal of what a private company’s common stock is worth. Public companies have a ticker; private ones hire a firm to estimate a fair market value, typically once a year or after a funding round. It matters to you twice. It sets the strike price on new grants, and it’s the value used to measure your spread at exercise. A higher 409A means a bigger spread on the same shares, which means more AMT income per share. When that number moves, the math moves with it — which is why the cards on our equity page let you drag it.

This is the crossover question, and it’s the one almost everyone asks first. The short version: there’s a cushion — the amount by which your regular tax exceeds your AMT calculation before any exercise. You can absorb spread income up to that cushion at roughly zero additional federal tax. The crossover is the share count where it runs out. The number is yours alone. It depends on your income, filing status, state, deductions, prior exercises, and the strike price on each grant. There’s a sample version you can play with on the equity page; the real one comes from your actual documents.

Depends on the calendar. Hold the shares more than two years from the grant date and more than one year from the exercise date, and the sale is a qualifying disposition: the entire gain from strike price to sale price is taxed as long-term capital gain. Sell before either clock runs out and it’s a disqualifying disposition: the spread at exercise (or the actual gain, if that’s smaller) is taxed as ordinary income, and only anything above it is capital gain. One wrinkle worth knowing: a disqualifying sale in the same calendar year as the exercise generally reduces or removes the AMT income from that exercise. Sometimes selling early is the cheaper move; sometimes holding is worth six figures. The analysis puts numbers on both before you pick.

No. Earlier is better, but sixty days is a real window. The decisions still on the table: how much of the position to sell, whether any previously exercised lots already qualify for long-term treatment, whether selling part can fund the taxes on the rest, and what to do before year-end. The one thing that doesn’t work is deciding in the moment. Get the documents in and the scenarios can be built in the time you have.

It’s a timing question with money on both sides, and there is no universal answer. Exercising now starts the holding-period clocks, locks in today’s spread (which may be small if the 409A is low), and puts your cash into stock that might rise, fall, or sit illiquid for years. Waiting keeps your cash and your flexibility, but a rising 409A makes the same shares more expensive to exercise tax-wise, and options expire. The honest version: “now or wait” is usually “how much now, how much later,” spaced to manage AMT across years. That’s the part a sandbox is for.

No — and we’d rather say so plainly than let you wonder. Every figure on the equity page comes from fictional sample data and simplified rates, so you can see the format without sharing anything about yourself. Your actual analysis is built from your real grants, vesting schedule, income, filing status, and state, after a secure intake, and a CPA is accountable for it before you act on it.

The analysis is built around ISOs, because that’s where AMT and holding-period timing do the most damage. But equity comp rarely arrives one flavor at a time. If you also hold NSOs, RSUs, ESPP shares, or founder stock, they’re part of your picture and we treat them that way — in your planning session and in any ongoing multi-year work.

It’s the client workspace: your grants, your income, your filing status, and a fair market value you can move. Change the 409A, change how many shares you exercise and when, sell part of the position instead of all of it, and watch the tax and cash picture update. The demos on the equity page are that workspace in miniature, running on sample data. Yours runs on your numbers. The workspace deepens by tier — from a single interactive report, to one-year timing control over each grant, to multi-year planning that tracks AMT credit and spaces exercises — but it’s the same idea throughout: try it before you do it.

No. Consulting-only is welcome. Plenty of people keep their current preparer and come to us for the equity planning alone. You’ll get a clear summary of what was modeled and why, so whoever files the return has what they need.

Five steps, and they don’t change: upload documents → baseline setup → work the sandbox → request a review → get your verdict. You share your grant paperwork, a recent return, and pay information through a secure intake. We set up your baseline — the picture with no new decisions in it yet. You explore scenarios in the sandbox. When one looks right, you request a review; it’s a button, not phone tag. A CPA checks the work and signs the verdict before you act. Thirty minutes on a call is enough to know which tier fits.