This is great information and I too would consider long and hard before laying out significant sums of cash early on. You're completely subject to market risk and you've just handed over some of your own money. Everyone's appetite for risk here is different...

That being said, my own personal opinion is, if you're in early enough that options are on the table, you've basically taken a bet on the company anyway and you're probably already sacrificing salary for equity. I wouldn't go mortgaging the house to purchase your options, but it's unlikely that's necessary and if you're seeing strike prices of under a couple of dollars per share, then you're probably talking about very affordable options.

In Ireland, the main tax differential is income tax (effective rate of 52%) or CGT (@30%). I didn't pay enough attention to this, so word to the wise of anyone going through this. Go talk to someone now, not when your company is IPO'ing.

Some interesting tidbits here from an Irish perspective which probably applies to lots of other non-US countries on options in US companies:

* Pre-IPO, the fair market value of the share is calculated and reported to the revenue commissioner along with an FX (USD -> EUR) rate set by the ECB. Talk to your finance/accounts dept. who are obliged to report this periodically. This fair market value determines the amount of tax you pay.

* The difference between the fair market value of the share and the strike price is essentially counted as income (not BIK, not CGI) when you exercise. In a lot of cases (Facebook, Twitter, Google, LinkedIn, Workday) the fair market value of the share was substantially less pre-IPO (12 months, 24 months) than post-IPO. That means exercising early in most of these situations would have been to your advantage if you were at these companies. Be aware you're completely subject to market risk here.

* Once you exercise the options and own the stock, then increases are subject to capital gains. An example here might be if the strike price on your options is $1, the fair market value is $2 & your company IPOs at some point in the future at $10. If you purchased options at the earlier milestone with a fair market value of $2 and sold at IPO, you'd pay 52% tax on $1 ($2 - $1) and CGT (30%) on $8 ($10 - $2). If you purchased at IPO and sold immediately, you'd pay income tax on $9 ($10 - $1). However, you need to actually hand over cash to exercise options and pay the tax, so be very aware that this is essentially now an investment.

* FX (USD/EUR) fluctuations can be just as important as stock fluctuations. Make sure you take that in to account. Right now, for example, this isn't quite in your favour, with the USD to EUR rate at high 1.35's/1.37's lately. Look at the currency history. You have options to sell and hold your money in USD (banks in Europe will typically open you a USD account) in which case you can hold until you believe the FX rate comes in line with what you expect. Again, you are subject to market risk here (your investments may go up as well as down!). In Ireland, gains via FX like this are also subject to CGT.

I'm not a tax advisor, but what I hope I'm convincing most people here is that if you do think you just hopped on a rocket ship (a Twitter, Google, Facebook) and you're a non-US resident with a reasonably significant amount of options (1,000+), I'd go talk with a tax consultant immediately and consider at least purchasing some of your options up-front if you've got cash that you're willing to bet with.

We've had a number of high profile IPO's here in Dublin recently (LinkedIn, Facebook, Workday & Twitter) so hopefully this convinces someone who jumps on the next one to go talk to a tax advisor.