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ISOs convert to NQOs once a certain amount of time has passed after leaving the organization, so there's not much difference there.

Having ISOs matters most when the underlying shares are illiquid, and you can defer the tax obligation until a sale event (provided you don't hit AMT). When you have a 7-10 year exercise window, the company will likely have IPO'ed or have failed. The tax benefit of ISOs are greatly diminished.

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> Provided you don't hit AMT

I think people downplay how easy it is to hit AMT. A single, no dependents, standard deduction filer making $120k will hit AMT after $26k of on paper gain for ISO exercise. Everything after that will be taxable. Filing jointly, 2 people who each earn $120k can absorb $18k in on paper gains from exercising ISOs. Add in a kid and it drops to $15k.

That's a paltry sum, basically breaking any advantage ISOs provide.

Yes but I believe you can (eventually) get the AMT difference back in offsets assuming there are later years when you are below the AMT limit. Fiendishly complicated and increasingly dumb though ...

That's assuming you can come up with the cash in a timely manner to pay the tax bill and your illiquid asset holds its value.

It's a rough situation and something needs to change.

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