Alert (July 30, 2013): Stock Comp Planning & Tax Rate Increases
Understanding The Impact Of The 2013 Tax-Rate Increases
The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases in 2013 that you must 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. These and related issues are the focal points of some thoroughly detailed new content at myStockOptions.com:
- Article: Tax Planning For Options, Restricted Stock, And ESPPs After 2013 Tax Law Changes: High-Income Taxpayers Impacted Most (Parts 1 and 2), by Tom Davison and William Whitaker. Multi-year planning is especially valuable with stock-based compensation, as you can control the timing of sales and option exercises and know when restricted stock/RSUs will vest. This two-part article summarizes the 2013 tax changes and explains planning ideas.
- Article: New Tax Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies, by Alan B. Ungar. The author explains the 2013 changes in tax law and suggests strategies for minimizing the new taxes.
- FAQ: What's the impact of the 2013 tax increases on my restricted stock grants? While increased tax rates indirectly affect the value of grants, a more important point is that income from these grants can push your yearly total income over the thresholds for the higher taxes, as this FAQ explains.
For more content on the tax changes that took effect in 2013, see the related articles and FAQs in the Tax Center at myStockOptions.com.
More Tax Changes On The Way?
Just as we are getting used to the recent tax changes, it now seems that additional modifications in the taxation of stock comp may be on the way as part of potential comprehensive tax reforms. The staff of the Senate Finance Committee has released the seventh in its series of reports for committee members on alternatives to consider when they start writing tax-reform legislation. For details, see The myStockOptions.com Blog.
Corporate Executives: Their Equity Comp Planning Dilemma
Executives, as corporate insiders, face special concerns in the financial planning for equity compensation. Their actions are highly visible and are subject to special securities regulations. Moreover, executives must perform a delicate balancing act to meet the needs, demands, and perceptions of the various constituencies interested in the company's stock. In The Equity Compensation Planning Dilemma For Corporate Executives, which complements another article by the same author at myStockOptions.com, CFP Geoffrey Zimmerman looks at these concerns along with ways to manage them that can improve executives' odds of achieving their financial goals.
Global Tax Guide: Six New Country Profiles
The taxation of income for employees working outside the US can be complex, especially when they cross borders during the vesting period of equity awards; yet most US companies communicate little tax information to stock plan participants abroad. Fortunately, the Global Tax Guide at myStockOptions.com explains the taxation of equity awards in 38 countries, including the income-sourcing and residence rules for mobile employees who move between tax jurisdictions. During the past quarter, we added six new country profiles: Argentina, the Czech Republic, Poland, the Philippines, South Korea, and Thailand. These bring the total number of covered countries to 38, spanning six continents. The country profiles are regularly reviewed and updated as needed, and we do our best to keep the writing lively.
Articles Dissect The Impact Of 2013 Tax Changes On NQDC
Over at our sister website myNQDC.com, our comprehensive resource about nonqualified deferred compensation (NQDC), four articles examine the impact of the 2013 tax changes on planning for NQDC:
- When Higher Tax Rates Make Nonqualified Plans More Attractive, by William L. MacDonald. This article considers whether the 2013 tax changes have increased the appeal of NQDC plans, looks in number-crunching detail at the pros and cons of a lump-sum payout versus installment distributions, and warns about tax problems that can arise from certain features of NQDC plan design.
- Four Nonqualified Plan Trends To Watch With Tax Rate Increases, by Michael Nolan. After explaining why the timing for NQDC plans could not be better, the author pinpoints trends involving income deferral that are likely to gather pace in the new tax and financial-planning environment.
- Tax Increases That Affect Your Planning For Nonqualified Deferred Compensation, by Bruce Brumberg. The capacity for tax-planning and income-shifting is one of the main benefits that make nonqualified plans appealing. When tax rates increase, the advantages of NQDC plans also grow. In this article, the author explains the various tax changes that affect NQDC planning.
- Advantages To Pre-Tax Deferral Of Income In An Uncertain Tax Environment, by Steve Broadbent and Chris Nyland. Learn how to consider recent and future tax-rate changes and investment returns when analyzing whether to participate in your company's NQDC plan. The authors' analysis compares deferred compensation to the after-tax investment of the same money. When tax rates rise, NQDC can perform better over the long term than a comparable personal investment account.
See also the full range of content on tax topics at myNQDC.com.