409A Valuation Impact Calculator

409A valuations set strike price for employee stock options at private companies. Required by the tax authority - sets fair market value (FMV) for tax purposes. Higher 409A = higher strike for new options (less attractive to employees) but lower spread (less AMT tax on exercise). Lower 409A = better employee deal but higher tax bill at exercise.

Example: employee has 10,000 options at 2 strike. Current 409A FMV: 8/share. Intrinsic value = 6 × 10,000 = 60k (taxable as AMT income on exercise). Exit at 25/share: total gain 230k (250k value - 20k exercise cost). Significant wealth - but tax timing tricky depending on AMT vs ordinary income.

409A practical implications: (1) Strike price for new option grants = current 409A FMV. (2) AMT trigger on early exercise (long-term capital gains preferred). (3) Tender offer pricing vs 409A FMV. (4) the tax authority audit risk if granting options below 409A FMV (significant penalties). 409A valuations updated 12 months or after material event (funding round, exit announcement). Most employees focus on stock options without understanding 409A mechanics - critical for tax planning.

A worked example

Try the defaults: strike price of 2, current 409a fmv of 8, options held of 10,000, exit price per share of 25. The tool returns 230,000.00. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Strike Price, Current 409A FMV, Options Held, and Exit Price per Share. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.

The formula behind this

Intrinsic value = max(0, 409A - strike). Exit profit = (exit - strike) × options. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

Where this fits in planning

This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.