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I'm given 1000 stock options (all vested) at $100 strike price per option. Current stock valuation is $1000 per share. As I understand, if I exercise I'll pay $100K out of my pocket and I'll also get taxed on $900K capital gain (please correct me if I'm wrong here). I'm not a US citizen, but I work full-time in the USA now (resident alien), my employment contract finishes in 1 year. I'd like to understand what would happen if I exercise these 1000 stock options when I stop working in the USA, would I still need to pay IRS tax on $900K gain and then also deal with taxes in my own country, or if I exercise options while I'm not a tax resident in the USA I'll need to deal only with taxes in my country?

Seems that residency starting and ending rules might be relevant for my case.

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  • Probably need to provide more details. how long have you been in the US, what is your country of citizenship ? A lot of countries have tax treaties so that you aren't taxed twice on the same income. – xyious Jun 8 '18 at 16:56
  • The point of question: Does IRS tax in such situations or not. If they do, then tax treaties and what not might make a difference, but if IRS does not tax, then it shouldn't be relevant. – Pavel P Jun 8 '18 at 17:02
  • OK, but you still need to make sure what exactly your status is for the IRS. Are you a resident alien, non-resident alien ? If you work full time in the US (and especially when you have vested stock options), you're likely a resident-alien, which means the same tax burden as US-citizens. – xyious Jun 8 '18 at 17:12
  • I'm resident alien, yes. But as I say, when I finish my work contract I'm no longer tax resident and I'm interested what would happen if I exercise options in that year. – Pavel P Jun 8 '18 at 18:27
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    @xyious+ option grant is not taxable in US; exercise (if below market, as practically always) is unless the option meets certain requirements to be classified as 'qualified' also called 'incentive' in which case exercise is not taxed but the lower price is used as basis so when you later sell the 'bargain' amount (i.e. the effective benefit) is included in your gain and taxed at capital-gains rates which are lower if you held more than a year. But how this changes if you become nonresident I don't know. – dave_thompson_085 Jun 9 '18 at 2:15

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