Financial Planning: Year-End Planning

In Their Own Words: Financial Advisors On Company Stock Strategy For The Market Downturn

myStockOptions.com Editorial Team
NEW! The market drop of 2008, combined with the likelihood of tax-rate changes ahead, affects planning for your company stock and grants. We asked financial advisors around the United States for their ideas on planning for both year-end 2008 and beyond as the downturn plays out. Read their responses in their own words.

Stockbrokers' Secrets (Part 3): What I Tell My Best Clients About Year-End Planning

W.E.B. Bantling and Michael Beriss
Every year, during tax season, we get tax-planning calls. Of course, by then it's too late. The time for tax planning is before the year ends. For year-end 2008, learn about several planning concerns that apply to stock options and restricted stock. Meanwhile, look ahead at the likelihood of tax rate changes under the new president.

How Tax Rate Changes Impact Strategies For Stock Options & Restricted Stock (Part 1)

Stanley Trotta with Robert Gordon
NEW! You believe a tax hike is on the horizon. Should you take action with your stock options and company stock now or wait until the new rates apply? This article series analyzes the decision. Part 1 looks at nonqualified stock options and restricted stock.

Ten Ideas For Year-End Tax Planning With Stock Options And Company Stock

Martin Nissenbaum
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 10 ideas to review to prevent paying more taxes than necessary.

Year-End Tax & Financial-Planning Issues For Employees

Bruce Brumberg, Editor-in-Chief
myStockOptions.com
This PowerPoint presentation (in PDF) provides an overview of changes in tax law during 2008 that affect financial planning for stock compensation and the related employee education, along with special issues to focus on at year-end and in down markets. (Premium members can view the presentation in PDF from the above link and may request permission to modify it for use and distribution at their companies.)

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.

Advisors To Clients: Prepare For Likely Tax Increases

Lisa Shidler
Investment News
Considering the likelihood of tax increases after 2008, some advisors (and their clients) want to sell at least some shares now, while the top capital gains rate is still only 15%. Other advisors suggest waiting, as stocks are low and gains from an eventual market upswing may outweigh any potential tax savings.

A Tough Tax Row To Hoe

Andrea Coombes
MarketWatch
A series of ideas on year-end planning, some of which may relate to decisions on company stock you own.

Financial Planning: What Higher Taxes Could Mean

Amy Feldman
BusinessWeek
With tax increases possibly ahead, consider these year-end ideas, including moves related to capital gains, company stock, deferred compensation, and restricted stock.

Death, Taxes, & Opportunity In A Down Market

Anthony Malakian
U.S. Banker
Depressed stock prices can provide opportunities for gifting and estate planning with grants of company stock, and even more so at the end of the year.

Now Is The Time To Exercise ISOs

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

Your Year-End Personal-Finance Checklist

Sue Stevens
Morningstar.com
The end of the year is one of the best times for tax and financial planning, including for stock option exercises. This article offers tips that apply every year.

Return to top of this page

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 2008, or for restricted stock that vests on that day, is the income taxable in 2008 or 2009?

All exercises with an exercise date in 2008, and all restricted stock with a vesting date in 2008, will be included in 2008 taxes and on your W-2 for 2008, 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?

Tax considerations alone should not drive the choice of what stock you sell. For example, if you are holding appreciated company stock from a nonqualified stock option (NQSO) exercise, you will be taxed on any capital gains when you sell it. The capital-loss carry-forward from last year's unused losses can offset these gains, making it less "taxing" to diversify your holdings...

The value of my restricted stock has fallen since vesting. If I sell my shares at year-end, do I get a credit for the income tax I paid at vesting, or do I 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...

Will my income from restricted stock vesting be netted against my short-term capital losses from this year (or those that were carried forward from last year)?

The value at vesting is all ordinary income. You have capital gain only for the increase in the stock price after vesting. Only this gain at sale can be...

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?

Experts suggest several strategies for you to consider when you exercise ISOs and are concerned about triggering the alternative minimum tax. For example, near year-end or at the beginning of the year, you can...

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?

When you are intermittently subject to the alternative minimum tax (AMT), tax advisors suggest different planning ideas on shifting income and deductions. You have much less flexibility in your planning when you project paying AMT for the next several tax years. Strategies for reducing the likelihood of triggering the AMT, and for minimizing the amount of AMT, are...

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...

Earlier in the year, I exercised ISOs, held the stock, and had a big spread from the market price that will trigger AMT. But my company's stock price has dropped below my exercise price. Can I eliminate AMT and even claim a tax loss?

As long as you sell the shares on or before December 31, you will...

Return to top of page