Financial Planning

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Tax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.

The most commonly overlooked asset in financial planning may be surprising: it's compensation. And it's where your clients usually need the most guidance.

Financial Planning › Dividends

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Want to learn more about financial planning for equity compensation? Visit our podcasts page for interviews with some of our expert contributing authors.

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Articles

How Dividends Impact Your Strategy For Stock Options And Restricted Stock (Part 1)

Tom Davison

Dividends can meaningfully add to the value of your equity awards and company-stock ownership. This article series looks at the effects of dividends on your planning for stock options and restricted stock. Part 1 explains basic dividend rules.

How Dividends Impact Your Strategy For Stock Options And Restricted Stock (Part 2)

Tom Davison

Dividends can meaningfully add to the value of owning company shares. This article series presents the effect that dividends have on financial planning for stock grants. Part 2 looks at dividend strategy.

When To Wait, Hold, Or Sell: A Wealth Manager Reveals His Wisdom On Stock Option Exercise Strategy (Part 1)

Tim Kochis

Podcast included! When your stock options vest, you need a strategy to make the most of their wealth-building value. However, no single strategy fits everyone. This article discusses various approaches to planning your option exercises.

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IRS Publication 550: Investment Income And Expenses

Internal Revenue Service

This extensive IRS guide covers many topics related to reporting income and expenses from investments, including dividends (Chapter 1), capital gains (Chapter 4), and interest on loans (Chapter 3).

FAQs

Do I get dividends with restricted stock units? 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?

Shares of restricted stock are issued to you and are outstanding in your name from the time of grant, though typically you cannot transfer them until vesting. Most stock plans...

How are the dividends on restricted stock taxed and reported to me?

Dividends that are earned on restricted stock are considered compensation income, which is reported on your W-2 (1099-MISC for nonemployees, such as directors). Once the shares vest, dividends are no longer compensation and instead become...

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Do I get dividends with performance share awards? How are they taxed?

Dividend rights are not mandatory. When a company pays dividends on outstanding shares of stock, it can also...

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...

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...

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...

Does receiving dividend payments on my restricted stock before it vests mean I automatically get the stock even if I leave the company before vesting?

Dividends and the shareholder voting rights that go with restricted stock do not...

When does my holding period for the special tax rate on dividends begin? At exercise or vesting?

The holding period to determine whether a dividend is qualified and thus taxed at a lower rate starts on...

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...

My company pays a good dividend. Should I exercise my NQSOs and hold the stock instead of just waiting to exercise near the end of the option term?

The traditional strategy with NQSOs recommends waiting till...

Both dividends and long-term capital gains are now taxed at the same rate. Can I net my dividends from my company stock against capital loss from the sale of company stock or another security?

Although qualified dividends are taxed at the...

If I hedge my company stock (for example, by selling calls on it), will the dividends get the favorable tax rate for qualified dividends?

This depends on the approach you take. For most taxpayers, qualified dividends are taxed at a top rate of...

If my brokerage firm lends my dividend-paying company shares while I have a margin loan, will the dividends get the favorable tax rate for qualified dividends?

If you take out a margin loan from your brokerage firm, it can lend your shares to short sellers. If that stock pays a dividend while your shares are on loan, you will...

If I borrow money to exercise my options, can I deduct the interest payments against dividend income from my company stock?

Maybe not. You are probably thinking that you can borrow money, such as with a margin loan, deduct this as an investment interest deduction, and net it against investment income...