What tax implications arise when exercising a stock option?

When exercising a stock option, you may have to pay taxes on the difference between the stock's market price and the option's exercise price. This is known as the "bargain element" and is subject to income tax. Additionally, you may also be subject to capital gains tax if you sell the stock at a profit later on. It's important to consult with a tax professional to understand the specific tax implications based on your individual situation.