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Should I exercise my startup stock options now or wait? How does QSBS qualification affect this decision?

Stock option exercise timing depends on multiple factors:

  • QSBS qualification: Exercising ISOs early can start the 5-year QSBS holding period for potential $10M+ tax-free gains
  • AMT considerations: ISO exercises may trigger Alternative Minimum Tax
  • Liquidity needs: Exercising requires cash for taxes and exercise price
  • Company prospects: Higher risk companies may warrant earlier exercise

For QSBS qualification, you need:

  • Stock acquired at original issuance
  • $50M+ asset test at issuance
  • 3-5-year holding period
  • Active business requirements

Range's analysis considers all these factors plus your complete financial picture to recommend optimal timing.

Source: Range Blog - ISOs vs NSOs, What is the QSBS tax exemption and do any of my investments qualify?

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