
Ask HN: How do I pay taxes on options? - taxes_u003f
Throwaway, because people know who I am and I don&#x27;t want to get pre-emptively fired tomorrow.<p>I have a decent chunk of equity options. Not a ton, but not bad. I&#x27;m planning on leaving the company soon, but still believe the business is sound and that equity is valuable.<p>Afaict, the tax penalty for executing options is the difference between the strike and exercise price. But what if there isn&#x27;t any liquidity for the stock? How do I assess the exercise price? Can I defer the tax penalty until I realize gains somehow?<p>Thanks, obviously new to this.
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troydavis
Talk with your company’s option plan administrator and then talk with a CPA -
before exercising or taking any other action.

This is not advice, nor a substitute for doing those things.

> But what if there isn't any liquidity for the stock?

As part of maintaining an options plan, the company will usually obtain a
professional valuation about every year. Google for “409a valuation” for more.
[https://gusto.com/blog/hiring/introduction-to-employee-
equit...](https://gusto.com/blog/hiring/introduction-to-employee-equity) is
also a decent start.

> Can I defer the tax penalty until I realize gains somehow?

The tax implications at exercise and at sale depend on the type of option, but
where there’s tax due, no, there’s no way to defer it.

This problem is why more thoughtful private companies (most notably,
Pinterest) now let employees exercise options for years after they leave:
[https://zachholman.com/posts/fuck-your-90-day-exercise-
windo...](https://zachholman.com/posts/fuck-your-90-day-exercise-window/)

