"Tax Reform 2.0" has hit the headlines, a month after this blog predicted a major buzz about followup tax cuts in the wake of the Tax Cuts and Jobs Act (see our related commentary, Tax Reform Developments: Making Provisions For Individuals Permanent; Capital Gains Indexing). Many of our talking points are now being echoed in the national news media, e.g. in The New York Times this week.
One of the most significant proposed tax cuts, the indexing of capital gains for inflation, is a long-recurring idea that has yet again been reintroduced. As explained in the tax-developments session at the recent myStockOptions financial-planning conference, capital gains indexing would routinely increase the cost basis of investments, such as company stock, for inflation. That would reduce the size of your taxable proceeds at sale, as only the inflation-adjusted capital gain would be taxed.
It must be acknowledged that the proposed additional tax cuts, especially if made by executive order, are politically controversial. As the NYT article bluntly puts it, the White House "is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives." Nevertheless, the indexing of capital gains for inflation would, in particular, also make stock compensation more attractive for employees by reducing the amount of tax paid on the gains when shares are sold. It would, however, complicate the related brokerage recordkeeping, cost-basis calculation, and tax-return reporting.
Tax-Reform Guidance At myStockOptions.com
After the Tax Cuts and Jobs Act, which took effect at the start of 2018, and with the current focus on more tax changes, tax planning remains at the forefront of public attention in the United States. Taxpayers remain concerned about the most effective ways to minimize taxes and prevent tax mistakes. This year the new tax law added potential confusion to the already complex arena of taxation for stock options, restricted stock, restricted stock units, ESPPs, and other forms of equity compensation.
The Tax Cuts and Jobs Act has several provisions that directly and indirectly affect equity compensation, whether in personal financial planning or in company stock plan administration. While the core tax treatment of stock compensation has not been altered, the new law's changes in the income tax brackets have a big impact on taxpayers who receive additional income during the tax year from an equity award or cash bonus.
At myStockOptions.com, the impact of tax reform on individuals is clearly explained in a variety of easily understandable content:
- Interactive quiz: Tax Cuts & Jobs Act
- myStockOptions Blog: Tax Reform Developments: Making Provisions For Individuals Permanent; Capital Gains Indexing
- Article: Private Company Stock Options And RSUs: 10 Facts To Know About The New Tax-Deferral Opportunity
- Our patented calculators and modeling tools
"Tax reform affects financial planning for everyone, even strategies for estate planning and charitable giving," says Bruce Brumberg, the Editor-in-Chief of myStockOptions.com. "When you have stock compensation and holdings of company stock, you layer on an additional set of complex tax rules. With our content and tools, we help our site members and licensing clients make sense of it all."
Pro Membership: Crucial Edge For Advisors With Clients Who Have Equity Compensation
Beyond the Basic and Premium Memberships at our website, myStockOptions.com Pro is a special membership level for financial advisors, CPAs, and other professionals who have clients with stock compensation. It gives full access to the whole website plus special features in the tools, where advisors can track and model stock grants for multiple clients. Access to the vast library of content at myStockOptions.com puts answers to tough client questions right at the fingertips of advisors, who can create PDFs of crucial content with their logo on it for distribution to clients.