Recent additions and updates at mostly concern the new tax laws that became effective in 2013 and their impact on financial and tax planning for equity awards. These are the first waves of much more content that we are developing about financial planning for equity compensation amid the new tax landscape. A sample of these and other major recent updates and additions at are detailed below.

New Tax Act And Medicare Surtax: Strategies To Minimize Increases

The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you need to consider in deciding when to exercise stock options, when to sell company stock, and how to plan around income from restricted stock vesting. Under the new laws, various income thresholds trigger higher rates, so it is wise to monitor the tax impact of income-generating events stemming from stock compensation. This is the focus of an article we published at earlier this month: New Tax Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies, by Alan B. Ungar, CFP. The author explains the changes in tax law and suggests strategies for minimizing the new taxes.

After Tax Season, Planning Focus Turns To Tax Projections

The time right after you have completed your tax return is ideal for big-picture financial planning. For example, this year and next year, what will your marginal tax rate be? If the marginal rate of your tax bracket this year is lower than the marginal rate will be next year, you may want to exercise options before year-end to take advantage of the lower rate. Given the changes under the American Taxpayer Relief Act, you may want to avoid income that subjects you to the highest income tax rate of 39.6%, which also triggers the higher 20% tax on capital gains and dividends.

Alert: When you do your projections, you should be aware of whether option exercises or restricted stock vesting will push your yearly income over the threshold for the additional Medicare tax on compensation and the new Medicare surtax on net investment income. These Medicare tax changes, which took effect in 2013, can also influence your decision about when to allocate additional compensation income.

These and other planning ideas are the focus of Stock Option Financial Planning After Your Tax Return Is Filed And At Year-End (Parts 1 and 2), by financial advisors Tom Davison and Liam Hurley.

Other Key Tax-Related Additions And Updates

Options And Restricted Stock For Directors: New Research

Data on equity awards to directors is available from a few different consulting firms. They all note that most companies grant only restricted stock/RSUs, part of a general shift away from the use of stock options in director compensation. Most companies also base director grants on a fixed value rather than on a fixed number of shares. For more related data from consulting firms, see the FAQ on this topic at

The Dreaded AMT: How To Find Out Whether Your ISO Exercise Will Trigger The Alternative Minimum Tax

The alternative minimum tax (AMT) is hitting a growing number of middle-income taxpayers, including people who exercise incentive stock options (ISOs) and hold the shares. This risk is especially pertinent for those who live in high-tax states, itemize tax deductions, and/or have significant personal exemptions, particularly if they exercise and hold ISOs with a big spread. To help your AMT planning, an FAQ at presents a table showing AMT trigger points across a wide range of yearly incomes.

Over the past several years, Congress has had to take special measures to restrain the spread of the AMT and thus keep it from unfairly taxing millions of people (see the related FAQ on recent developments). In the American Taxpayer Relief Act of 2012, Congress made three major changes in the AMT calculation but did not eliminate the AMT (see the FAQ with details of the changes). If you are in danger of triggering the AMT, you may be interested in our FAQ that explains various ways to minimize AMT exposure.

Discounted Stock Options: Recent Court Ruling Upholds 409A Penalties

A recent summary judgment decision, in Sutardja v. United States (Federal Claims No. 11-724T 227-13), makes it clear that discounted stock options face the draconian penalties of IRC Section 409A. The amounts in dispute total over $3 million, plus another $304,456 in interest. While in this challenge to the IRS assessment the court still must decide whether discounted stock options were actually granted, it brushed off all the plaintiff's legal arguments claiming that Section 409A does not apply to discounted options. For additional information on discounted stock options, see the related FAQ on See also, our sister website on nonqualified deferred compensation, for details on IRC Section 409A.

France: Major Tax Changes Affect Stock Comp

The election of a new government in France last year has had a major impact on the country's tax landscape, and stock compensation has not escaped. Enacted on December 30, 2012, the French Finance Act of 2013 significantly changed the taxation of qualified stock options and RSUs granted on or after September 28, 2012. For these grants, income received at exercise/vesting is taxed at progressive rates of up to 45%, though the payment of this tax is deferred until the sale of the shares. In addition to the payment of income tax at sale, however, any appreciation in share value after exercise is also subject to progressive income tax rates up to the maximum of 45% plus additional social taxes of 15.5%. This tax treatment is effective from 2013 onward for all sales, regardless of the date when the underlying equity award was granted or the date when the shares were acquired. Holding the shares after acquisition can help reduce the capital gains tax at sale. To find out how, and for more on the complex taxation of stock comp in France, see the Global Tax Guide at The section profiles the taxation of equity awards in over 30 other countries around the world.