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How Tax Reform Affects Year-End Planning For Equity Comp And Company Shares

Tax Reform Impacts Year-End Planning For Equity Comp

It's officially Thanksgiving week, which also means it's game time for year-end financial and tax planning. Having a solid year-end playbook is more important than ever for employees with equity compensation who are evaluating whether to exercise stock options, sell shares acquired from equity compensation, or donate company stock to charities.

Tax changes introduced in 2018 by the Tax Cuts & Jobs Act (tax reform) significantly affect these year-end-planning decisions. To help, at we provide education and guidance on major issues, choices, and strategies for the end of 2018 and the start of 2019 (see our website's section Financial Planning: Year-End Planning).

Tax Brackets And Rates Affect Year-End Planning

Multi-year planning is always valuable with equity compensation, as you can control the timing of stock sales and option exercises, and you know when restricted stock/RSUs will vest. Employees with equity grants, employee stock purchase plans, and company shares should be aware of the 2018 and 2019 thresholds for higher tax rates on compensation income and capital gains, the additional Medicare tax on compensation income, and the Medicare surtax on investment income. In particular, they may want to consider keeping their income below those known thresholds, if possible, while evaluating whether there is enough withholding to cover the taxes owed.

For example, a big restricted stock/RSU vesting could push your income above the level that triggers the highest capital gains tax rate of 20% and/or the Medicare surtax of 3.8% on investment income. If your income in the next calendar year will be less than the level that triggers those higher rates, waiting until 2019 to sell stock could give you a capital gains tax rate of just 15% and no Medicare surtax.

However, tax rates should not be the only consideration. Even if you predict that you will be in a lower tax bracket in the future, many experts maintain that tax rates should never be the main reason for exercising options or selling shares, or waiting to do so, at the end of the year. Instead, make investment objectives and personal financial needs, not tax considerations, the driver of your decisions.

Year-End Content Provides Education And Guidance

At, the section Year-End Planning has been fully updated for 2018, including revisions for what's different after tax reform. This content includes the following articles and FAQs.



In addition, the calculators and modeling tools at allow users to play out various "what if" scenarios with different tax rates and stock prices.

For similar education and guidance on year-end planning for nonqualified deferred compensation, employees can turn to, a separate sibling publication of


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