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I have ISO stock options as part of my employment in California, USA. In the middle of 2019 I had to leave the USA for family reasons. In 2020 I wasn’t in the US (became non-resident alien for tax purposes). In the beginning of 2020 I executed all my stock options, most of them vested while I was resident in California in 2016-2019. Since the options vested while I was in California, I’ll need to pay AMT tax in 2020 after after executing stock options. Are the stocks that I acquired after executing stock options subject to US taxes if I sell them later while being non-resident alien?

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Assuming that you hold the shares acquired with the exercise of your incentive stock options for more than a year after the exercise and two years after the grant, any further gain (or loss) - measured by the difference between the sale price of the shares and the amount paid for them on exercise ("strike price" or "exercise price") - should be considered a long term capital gain (or loss). As a nonresident alien, that gain should be exempt for US Federal income tax (don't know about California specifically).

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    IMO long term or not isn't applicable if one isn't subject to the US (fed/state) taxes. If options were NSO, I'd be taxed on the difference of FMV minus strike and from that point on I'd be the owner of the shares. But because these were ISOs effectively, some of that taxable difference gets deferred, that's why I'm curious if they are subject to US taxation after becoming nonresident alien
    – Pavel P
    Feb 9, 2021 at 11:03
  • @PavelP Good point about long vs short term capital gains! Either way, their are exempt from tax if you are an NRA. I guess that noticing if a capital gain is long or short term becomes an automatic reaction over time...
    – Jack Fleeting
    Feb 9, 2021 at 11:48

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