Jason
Pre-IPO Startup Employee · Seattle, WA · Age 29
SingleIncome: $180KTech
“One wrong move on AMT could have cost me $163K.”
The Situation
$180K W-2 salary + 50,000 ISOs at $2 strike ($900K spread at current valuation)
Pre-IPO company valued at $20/share — exercise window opening soon
Without tax planning, exercising and selling could trigger $450K+ in avoidable federal taxes
Strategies Identified
1. ISO Exercise Timing (AMT Optimization)
IRC §422, §55
$163,000
Exercise ISOs in tranches across tax years to stay under AMT exemption threshold.
2. QSBS Exclusion (Section 1202)
IRC §1202
$250,000+
Hold shares 5+ years post-exercise. Exclude up to $10M in gains from federal tax.
3. 83(b) Election on Early Exercise
IRC §83(b)
$37,000
Early-exercise unvested shares and file 83(b) to start LTCG clock at low FMV.
Tax Impact
Before
$502,000
→
After
$52,000
Annual Savings
$450K+
90% reduction
Action Steps
1
Model AMT impact of exercising in 2026 vs splitting across 2026-2027
2
File 83(b) election within 30 days of any early exercise
3
Confirm company qualifies for QSBS (C-corp, under $50M assets at issuance)
4
Set calendar reminder: do NOT sell within 5 years of exercise
What could you save?
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