Financial Planning: Year-End Planning

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 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.

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.

Now Is The Time To Exercise ISOs

Robert Gordon
Investment News, 1/14/08
Before the end of the year, review any ISO stock you're holding from earlier exercises and consider strategies for the following year.

Those Who Paid AMT Last Year Will Have To Pay It Again

Kathleen Pender
San Francisco Chronicle, 12/23/07
Though Congress passed a bill at the end of 2007 which spares over 20 million people from the alternative minimum tax (AMT), most people who have already paid the AMT will face the AMT again unless income or family circumstances have changed.

Planning In Uncertain Times

Andrea Coombes
MarketWatch, 12/2/07
Even though we're into December, the tax law for 2007 still may change. This article presents ideas for year-end planning amid this uncertainty, including approaches in the face of the unclear future for AMT income exemptions.

Shifting Winds

Eric Reiner
Financial Advisor, 10/07
Year-end tax planning can involve both standard considerations and those unique to 2007, including moves related to the alternative minimum tax, the kiddie tax, and tax deductions and credits that are ending this year.

10 Smart Year-End Money Moves

Mary Beth Franklin
Kiplinger.com, 11/1/07
Various ideas for year-end planning, including some that can affect decisions about your company stock and the alternative minimum tax.

Don't Wait Till April

Aaron Pressman
BusinessWeek, 12/4/06
As the end of the tax year approaches, you want to consider smart moves to make before the end of December to produce tax savings (or to avoid mistakes) on your tax return. This article considers charitable donations of stock, the AMT, and retirement plans.

No Tax Law Changes Expected While Bush Is Still In Office

Kathleen Pender
San Francisco Chronicle, 11/12/06
The likelihood of tax-law changes can affect your year-end planning. Many of the cuts made during the Bush presidency are set to expire between now and 2010. This article explores predictions by experts about changes in the AMT, the capital gain and dividend rates, estate taxes, and other tax topics.

Year-End Tax Planning, Take 2006

Eric Reiner
Financial Advisor, 10/06
Tax-law changes in 2006 present a few new strategies, including some related to charitable contributions.

Your Year-End Personal-Finance Checklist

Sue Stevens
Morningstar.com, 10/5/06
The end of the year is one of the best times for tax and financial planning, including for stock option exercises.

The Tools Of The Trade

Robert Gordon
On Wall Street, 12/05
Overviews complex year-end tactics for high-net-worth individuals who want to fine-tune their tax strategies. Includes methods for deferring short-term capital gains.

Seven Year-End Tax Tips

Christine Benz
Morningstar.com, 10/11/05
Concrete steps you can take to ensure your tax bill is no higher than necessary (including putting AMT on your planning radar).

Year-End Tax Strategies

Eric Reiner
Financial Advisor, 11/04
Multi-year tax projections show if or when you trigger AMT. Consider ways to shift income and deductions between non-AMT and AMT years, among other perennial tidbits for year-end tax planning.

Less Taxing Work

Ray Martin
CBS.MarketWatch.com, 11/10/04
Consider a range of tax strategies before year-end. Some of these timeless tips are germane to employee stock options. (Registration is required.)

Year-End Tax Planning

SmartMoney.com
11/04
Here are some maneuvers that are especially useful, with a few perennial good tips related to stock options.

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FAQs   (Jump to articles)

UPDATED! What are some year-end strategies for stock options, stock appreciation rights, and restricted stock? 

This depends on your financial situation, on whether your decisions should be entirely tax-driven, on what you did earlier in the year, on your outlook for your company's stock price, and on the prospects for changes in tax law during the year ahead. Below we present 10 ideas...

For NQSOs or SARs exercised on the last business day of 2007, or for restricted stock that vests on that day, is the income taxable in 2007 or 2008? 

All exercises with an exercise date in 2007, and all restricted stock with a vesting date in 2007, will be included in 2007 taxes and on your W-2 for 2007, and will count...

At the end of the year, should I exercise my in-the-money options and sell the stock to take advantage of netting the gains against my short-term capital losses from this year (or those that were carried forward from last year)? 

Don't get tripped up by misunderstanding the tax rules. A common mistake is thinking that because you are selling a stock a capital gain lurks somewhere in the tax calculation...

Are there any stock-option strategies for using my capital-loss carry-forwards? 

A capital-loss carry-forward from the past year is first used to offset capital gains from stock sales this year, dollar for dollar, up to the full amount of the carry-forward. For example, if you are holding appreciated company stock from a nonqualified stock option exercise or restricted stock vesting, you will be taxed on any capital gains when you sell it...

UPDATED! Are there any strategies for paying estimated taxes on income from stock options and restricted stock? 

Estimated-tax periods end on the last days of March, May, August, and December, with payments due by the 15th (or the next business day) of the following month. If you are paying estimated taxes, one strategy is that just after the start of an estimated-tax period you can...

At year-end, is there any general way to determine how many ISOs I can exercise and hold before triggering AMT? 

One strategy for minimizing AMT is to spread out the exercise of ISOs over...

What ISO strategies can help minimize AMT liability? 

Several strategies exist. But you should speak with a financial advisor, accountant, or tax lawyer when you believe an ISO exercise and hold will trigger AMT...

UPDATED! I know that my ISO exercises will trigger the AMT for me this year or next. What planning strategies should I use that are related to other tax payments and income? 

Once you know you will probably pay AMT, many of your normal tax-planning activities are reversed. For example...

When I hold ISO stock, how far must the stock price drop from the market price at exercise for AMT to exceed what my ordinary income tax would be if I sold the shares this year? 

Assume that the ISO exercise/hold or other parts of the AMT calculation will trigger AMT. A rule of thumb is...

NEW! The value of my restricted stock has fallen since vesting. Should I sell my shares at year-end to get a credit for the income tax I paid at vesting, or to net the loss against capital gains? 

The vesting and the sale are separate transactions and generate different types of income. Unless you made an 83(b) election to be taxed at grant, you were first taxed on the stock's value at vesting, which created ordinary income to you. With restricted stock units (RSUs), taxation occurs...

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