A worked example

Ninety days to decide on the options

Priya, 34, is leaving a startup with 50,000 vested incentive stock options at a $2 strike. The latest 409A puts the shares at $9, and she has 90 days to exercise or forfeit.

“What does exercising actually cost me, and would it be different if they were non-qualified?”

What the projection shows

The $100,000 of cash she pays for shares she can't sell, and the $350,000 spread that doesn't appear on her regular return but lands on the alternative minimum tax instead. What AMT takes comes back as a credit in later years, and the table counts it down. The same spread on an NSO would be ordinary income right away and never touch AMT at all.