Say you have the following situation:
- You have pre-IPO stock options
- Half of the options have vested, the other half will vest over the next 2 years
- Your strike price is S
- The fair market value of the stock is now F, where F > S
- It seems likely the company will go public in a year or so
- I'm in the US
What are the tax implications of exercising my options early? I've heard something about some sort of tax (AMT?) on the difference between F and S. However, I've also heard you need to hold the stock for a year to avoid some sort of capital gains tax, and exercising early gets the clock ticking earlier. What is the math here? How can I tell if it's worth it?