The maximum deduction through this method is up to 50% of your AGI for the tax year in which the deduction is claimed.
In an effort to preserve open space land for public enjoyment, the law allows for the donation of land with a deductible fair market value that is higher than the cost of the land. As with any charitable deduction, this deduction can reduce your W2 income which might be going through the roof because of a large NSO exercise. Although you may not have land to donate, there are real estate funds that have the expertise to acquire land with a conservation option and get them permitted for a much more valuable use. If the project is not easily pursued to completion for some reason, the fund can elect to donate the land instead. There can be a considerable tax benefit that is larger than the original cost of the investment by a factor of several times. At this point, the opportunity arises for original investors who cannot benefit from the tax break to salvage principal at some level of profit to new investors who can benefit from the tax break. You’ll need to work with specialists within your wealth management group to identify these opportunities because they pop up suddenly and don’t last long. Successful execution of this process could result in a significant recovery of some of the NSO taxes you paid that tax year.
The maximum deduction through this method is up to 50% of your AGI for the tax year in which the deduction is claimed. Note that your AGI can be very high during the year where you exercise a bunch of NSOs that have a very low strike price compared to the current Fair Market Value. The rules and risks for this are extensive so you are advised to seek professional advice. ESO does not endorse or facilitate any investment vehicles that are contemplating this procedure.
For more ways on how to reduce stock option taxes check out ESO's page Ways to Reduce Stock Option Taxes. If you are looking for help financing a stock option exercise, please fill out the form below to get in touch.