Exercise now, in tranches, or wait?

See AMT vs ordinary income vs long-term capital gains side by side. Numbers are educational — pair big decisions with a CPA.

Best path for this offer

Exercise now could net $37.9K more than the worst case.

Your inputs

Strike ($/share)

Current 409A FMV ($/share)

Expected exit price ($/share)

Your annual income ($)

Filing status

Exercise now

Best

Pay AMT this year on the FMV-minus-strike spread. Hold past 1y post-exercise + 2y post-grant; appreciation is long-term capital gains at exit.

Cost basis$5.0K

LTCG at exit$45.0K

Gross proceeds$250.0K

Net proceeds$200.0K

Exercise in 3 tranches

Split exercise across 3 years. Each year gets a fresh AMT exemption, so single-year tax burden drops. Same LTCG treatment at exit.

Cost basis$5.0K

LTCG at exit$45.0K

Gross proceeds$250.0K

Net proceeds$200.0K

Wait until exit (cashless)

Exercise at the same moment as exit. No AMT exposure — but the entire spread is taxed as ordinary income at your top marginal rate.

Cost basis$5.0K

Ordinary income tax$82.9K

Gross proceeds$250.0K

Net proceeds$162.1K

Estimates only. Ignores: state tax, AMT exemption phaseout (kicks in around $609k single / $1.2M joint), AMT credit recovery in later years, NIIT, and MFS-specific rules. ISO holding rules assumed met for long-term capital-gains treatment.