Stock Option Early Exercise 2027 vs Vesting Calculator
Early exercise lets you buy unvested options today and file 83(b) — starting the LTCG holding clock immediately. The trade-off: cash at risk if you leave or the company fails. This calculator compares both paths after-tax.
| EARLY EXERCISE + 83(b) | |
| Cash Out for Strike | — |
| Tax/AMT at Exercise | — |
| LTCG Tax at Exit | — |
| Total Tax (Early) | — |
| Net Proceeds (Early) | — |
| WAIT TO VEST | |
| Tax/AMT at Vest | — |
| LTCG Tax at Exit | — |
| Total Tax (Wait) | — |
| Net Proceeds (Wait) | — |
Early exercise of stock options means purchasing unvested shares immediately, paying the strike price upfront, and filing an 83(b) election within 30 days. This starts the long-term capital gains clock at exercise instead of at vest. The benefit: when the company exits, more of the gain is taxed at favorable LTCG rates instead of ordinary income. The risk: cash at stake if you leave or the company fails.
When Early Exercise Makes Sense in 2027
Three conditions should all be true: (1) company is very early-stage with low FMV (cash outlay is small), (2) you have high conviction and plan to stay 2+ years to clear vesting, (3) you can afford to lose the cash. Best fit: founders, first 10 employees, anyone joining pre-Series A with sub-dollar strike prices.
The 83(b) Election Mechanics
Early-exercise option plans permit purchasing unvested shares. The shares are subject to repurchase by the company at original strike if you leave. File 83(b) within 30 days of exercise, declaring any bargain element as ordinary income now (often zero if you exercise at strike = FMV). All future appreciation qualifies for LTCG, 1-year clock from exercise date.
Risk Quantification
If the company fails: you lose the entire cash outlay. Capital loss is limited to $3,000/year against ordinary income (carryforward). For a $20k early exercise that goes to zero, you might recover the loss over 7+ years of small ordinary income deductions. Treat early exercise as a high-stakes bet — don't put in money you can't afford to lose.
Last updated May 2026. Sources: IRS Pub 5528 — 83(b), IRS Form 3921