Financial Planning

What is your strategy? When should you exercise stock options?

Financial Planning suggests general practices and strategies that may help you maximize the wealth-building potential of your stock options and restricted stock while minimizing taxes. This overview page presents selected articles and FAQs from the subtopics in this section. For the full content of a subtopic, click on a link in the upper left.

Articles   (Jump to FAQs)

Stockbrokers' And Financial Planners' Year-End Secrets (Part 3): What We Tell Our Best Clients 

W.E.B. Bantling and Michael Beriss
UPDATED! Every year, in February, after the W-2s and 1099s have arrived, we get tax-planning calls. Of course, by then it's too late. The time for tax planning is before the year ends.

Ten Financial Planning Rules Everyone With Stock Options Needs To Know 

Michael Beriss
Managing your stock options is one of the most complex financial challenges you will face. These 10 rules will help you get the most out of your company's stock plan.

Ten Ideas For Year-End Stock Option Tax Planning 

Martin Nissenbaum
UPDATED! You are doing some year-end or year-beginning tax planning with your stock options and company stock. While investment objectives, not tax considerations, should generally drive your decisions, here are ten ideas to review to prevent paying more taxes than necessary.

Stock Option Financial Planning After Your Tax Return Is Filed And At Year-End (Part 1) 

Tom Davison and Liam Hurley
Right after you have completed your taxes is a great time to do your big-picture financial planning. You can more accurately project your income and likely tax situation for the remainder of this year and the next, including AMT risk and capital-loss carry-forwards, to develop your strategy. At the end of the year, review your analysis and strategy again.

The ISO Tax Trap And The AMT Credit Myth: What To Do Before Exercise And At Year-End 

Alan Ungar
The tax reductions of the past few years have brought both good and bad news for holders of incentive stock options (ISOs). While you may have lower capital gains rates when you hold the shares long enough after exercise, it's harder to avoid the risks of the alternative minimum tax (AMT) and to fully recoup any AMT credit.

How To Avoid The Most Common Stock Option Mistakes (Part 1) 

Beth Walker
Avoid the mistakes others made during prior boom markets and downturns. Common mistakes arise in nine different situations, including termination, mergers, financial planning, term expiration, and life events.

Refundable AMT Credit (Part 1): Different Rules For Old Unused Credit 

Kaye A. Thomas
UPDATED! Beginning with tax returns for the tax year 2007, certain taxpayers are able to claim old unused AMT credit even if it means getting a refund that exceeds the current year's tax. This pair of articles provides complete coverage of the refundable AMT credit, which provides a way for many people to use more AMT credit than under the regular rules.

How To Avoid The Most Common Stock Option Mistakes (Part 2) 

Beth Walker
Avoid the errors that many people have made, including mistakes that stem from major life events and taxes.

How To Develop A Stock Option Exercise Strategy To Reach Your Financial Goals (Part 1) 

Alan B. Ungar
NEW! One of the most vexing investment decisions you will ever make involves when to exercise your stock options and when to sell the shares. This article series will give you the tools for determining that time.

How To Develop A Stock Option Exercise Strategy To Reach Your Financial Goals (Part 2): Understand Risk Versus Return 

Alan B. Ungar
NEW! Deciding which stock options to exercise and when can pose a dilemma. Part 2 of this series focuses on reducing risk when you exercise. Quantifying a risk/return number can determine the point when holding your options is no longer desirable.

Return to top of page

---

FAQs   (Jump to articles)

UPDATED! Does the American Jobs Creation Act, particularly Section 409A on deferred compensation, affect my stock grants? 

A number of tax law provisions and interpretations that may affect your stock grants occur in the wide-ranging American Jobs Creation Act of 2004 (AJCA); the final regulations on deferred compensation under Section 409A (issued on April 10, 2007), which adopt the proposed regulations (published on October 4, 2005), as amended; and a series of notices from the IRS, beginning with Notice 2005-1...

How does a dividend affect the value of stock options, restricted stock, and restricted stock units? 

In theory, when a company pays a dividend, particularly a large special dividend, its stock value declines by...

NEW! Are qualified dividends included in the AMT calculation? 

Qualified dividends do receive special tax treatment when they are part of your net capital gain. The amount of AMT is capped by the...

Can you calculate whether it is better to be granted stock options or restricted stock? 

The outcome depends on how well your company's stock price does in the years after the grant date and on the ratio of stock options to restricted shares, among other factors. To calculate whether the appreciation of stock option gains equals or exceeds restricted stock gains, you need to...

Am I entitled to voting rights or any stock dividends paid to shareholders before I exercise? 

No. Until you exercise a stock option, you do not have the rights of a...

I plan to exercise options for stock that pays dividends. Are there any exercise strategies or at least mistakes to avoid? 

To receive a dividend you must own a stock on the record date, so you want to be aware of the ex-dividend date. Also consider...

Do I get dividends with restricted stock units (RSUs)? How are they taxed? 

When a company pays dividends on outstanding shares of stock, it can choose...

Do I receive dividends on unvested restricted stock and have voting rights? 

Typically, though you cannot transfer them until vesting, shares of restricted stock are issued to you and are outstanding in your name. Therefore...

I have various stock option grants with vested options. Do I need to exercise first my oldest grants or my oldest vested options? 

There's no requirement for which vested options you must exercise first. The decision of which options to exercise first is part of your...

Can I reinvest my restricted stock dividends in more company stock instead of taking cash income now? 

Instead of paying cash dividends, a small number of companies require...

Return to top of FAQs    Return to top of page