firebus's picture

ISO Exercise Calculator

Oy! It took me forever (literally a week, and probably 4 different tries) to get the algebra right on this.

Let's say you have Incentive Stock Options.

When you buy stock through the ISO plan (exercise the options), you have to pay some money to the company. You will also probably owe some Alternative Minimum Tax, proportional to the difference between the strike price and the market price when you exercise the option.

firebus's picture

Still thinking about ESPP

Are you bored yet? Probably :) I'm not!

The internet is generally of the opinion that you should sell your ESPP stock as soon as possible, paying the penalty (in extra tax) of a disqualifying distribution.

The calculators I've made so far only show a pretty nice benefit for holding the stock. So why sell as soon as you can?

  1. The increased risk that comes from holding the stock for a longer period of time. The increased profit from holding is a small part of the total profit, so a small swing in stock price or a market downturn can wipe that out

firebus's picture

Graphing ESPP calculator


  • This one plots the net profit of qualifying vs. disqualifying distributions over a range of sale prices.
  • This graph does not consider the annualized return, which is much higher for an immediate disqualifying distribution (you sell right after you buy) than for the corresponding qualifying distribution, assuming you have to hold for 18 months.
  • This graph also omits any treatment of the probability of a given sale price given the market price.
firebus's picture

423-Qualified ESPP Tax Calculator


  • An ESPP is a benefit plan that allows employees to purchase stock from their company at below market price. Usually income from your paycheck is withheld for a certain period of time (say, 6 months) and then used to buy stock at the end of the period.
  • Your tax rate for the transaction depends on how long you hold the stock before selling it.
  • To get favorable tax treatment, you have to hold the stock for 2 years after the grant of the ESPP (the start of the withholding period) and 1 year after the stock is
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