Stock Exercise Problem
My company went public recently and I haven’t fully exercised all my stock options. The problem is that stock has gone up and if I exercise the stock I will have to pay huge amount of Alternative Minimum Tax (AMT). Is there a way I can avoid paying so much tax? Is it possible to use a “trust” somehow? Does anyone know a good Financial Planner who has experience with this? Appreciate any guidance you can offer.
Welcome to the world of IPO and tax shocks...u don’t have a way out
The latest tax reform has increased AMT exemptions. Contact a tax professional to see the impact with the new rules.
Agreed, something that I am pursuing.
I’d say plan well with a fiduciary.
Had not thought of this, thanks!
Talk to a professional for sure but two pieces of knowledge I can give: 1. You can recoup the AMT in future tax years where you have no AMT liability. It sucks up front and it may take a while, but the money is not gone forever. I think the term is AMT carryforward but if I am wrong I will link you. 2. Exercise over two years if you can so you can use the exemption each tax year. Ideally you exercise this year and the exemption reduces your AMT, and then do it again with full exemption next year on Jan 1.
I've no experience with this, but can the company structure the transaction so that some of the stocks you get from exercising will be used to pay the tax?
Some companies do allow a private sale of stocks back to the company to cover AMT. But if the IPO is imminent, just go that route. You have until April 15, 2019 to pay AMT on any 2018 exercises anyway. Edit: It already went public so yeah, you can sell on the market to cover AMT.