The holidays are for family, friends - and financial moves that future-you will thank you for.

If you hold stock options, year-end isn’t just about finishing projects and setting out-of-office messages. It’s one of the most important moments to make sure your equity is working for you - not creating a surprise tax bill later.

Here’s how to think about your Incentive Stock Options (ISOs) and Nonqualified Stock Options (NSOs) before December 31:

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1️⃣ Know which kind you have

Understanding the difference is everything.

• ISOs can qualify for favorable long-term capital gains tax treatment - but only if you meet specific holding periods and avoid triggering the Alternative Minimum Tax (AMT).
• NSOs are taxed as ordinary income when you exercise. That means your strike price, market value, and timing all matter for your tax bill.

📚 Read: What’s the Difference Between ISO and NSO Stock Options?

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2️⃣ Time your exercise strategically

Exercising in December vs. January can shift when your taxes are due - and potentially how much you owe.

• If you’re exercising ISOs, spreading your exercise between two calendar years can help manage AMT exposure.
• For NSOs, exercising before year-end could let you use existing tax withholdings to cover some of your liability.
• 💡Small timing differences now can mean big differences next April.

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3️⃣ Understand the AMT (for ISOs)

When you exercise ISOs, the “bargain element” - the difference between your strike price and the current fair market value - may count as income under the Alternative Minimum Tax (AMT).

Even though you haven’t sold the shares, it can still increase your tax bill for the year. A good CPA can help you run a “what if” AMT projection before you exercise.

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4️⃣ Check your safe harbor

If you’ve exercised options or had a big income year, make sure you’ve paid enough in taxes through withholding or estimated payments. You’re generally in the clear if one either of the following situations is true for you:

• You’ve covered at least 100% of last year’s total tax or 110% if your AGI was over $150K.
• You're paid at least 90% of your current year tax liability.

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5️⃣ Think long-term

If you exercise early and start holding your shares, the clock begins for long-term capital gains treatment. Sell after holding for at least one year post-exercise and two years after the grant date, and you could qualify for much lower tax rates on your gains.

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💡The takeaway

Your stock options can be one of your most valuable assets - but how and when you exercise them matters. Understanding the basics, running quick projections, and timing your moves around year-end can help you optimize your tax outcome and keep more of your hard-earned equity.

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👉 Want to exercise your options without tying up your savings?
‍See how Equitybee can help you fund your exercise →

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🎥 Want to learn more about stock options? Watch our Stock Options Unlock video guide → Watch on Instagram

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👀 Coming Next Month - Equitybee vs. Secondary Platforms

‍We’ll break down how employees can compare their liquidity paths - and why structure, risk, and upside matter more than headline offers.

_{Important Note: Equitybee does not provide tax advice. You should always consult with a qualified tax advisor about your specific situation.}

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