Does anyone know the tax implications of being granted stock options in CA state?
Incentive stock options are not subject to regular income tax on exercise, but do give rise to an item of tax preference. On the sale of the stock at least one year after exercise and two years after receipt of the option, and satisfaction of a bunch of other requirements, you would have capital gain for federal income tax purposes. With non-qualified options, you will have income on the exercise of the options. California follows federal definitions and timing but offers no capital gain preference. You mentioned that the granting company is a start up, so exercising the options right away probably means no income on exercise and capital gains on sale if you hold for a year.
