How am I taxed if I’m granted an incentive stock option in 2019 and sell all the shares in the same year?

by Paul K. Rudoy, CPA, PFS | Feb 05, 2019

If I exercise an incentive stock option grant in 2019 and sell all the shares in 2019, how am I taxed? Are the proceeds considered ordinary income or capital gains? Additionally, in this same scenario, am I subject to the alternative minimum tax (AMT)?

The answer to this depends on whether the stock options are qualified or nonqualified options. It also depends on the time from when you were granted the options and the time you exercised the options to the sale date.

The Alternative Minimum Tax could be an issue upon exercise. With the increased limits on AMT beginning in 2018, this applies to fewer taxpayers.

Due to a myriad of possible answers depending on the type of options you have, I highly recommend you consult with a CPA on your specific facts.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Paul K. Rudoy, CPA, PFS, is managing partner of H2R CPA in Pittsburgh, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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