No Conferences, No Problem: Online CE Courses Expanded At myStockOptions

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While states are finally starting to reopen after the pandemic shutdowns, the return of traditional conferences, seminars, and chapter meetings for equity comp pros and financial advisors are still a long way off. If you need continuing education (CE) credits for your professional certifications, online courses and events are the way to go for the foreseeable future.

myStockOptions.com is there for you. We have expanded the valuable offerings in our Learning Center, which offers CE credits for:

  • Certified Equity Professionals (CEPs)
  • Certified Financial Planners (CFPs)
  • Certified Private Wealth Advisors (CPWAs)
  • Certified Investment Management Analysts (CIMAs)

A new course and exam on taxation and tax reporting for equity compensation builds on the previously established programs about financial planning, stock options, restricted stock/RSUs, employee stock purchase plans, and SEC law.

CEPs Can Get All Of Their CE Credits, CFPs Most Of Them

The programs in the myStockOptions Learning Center now offer:

  • 35 continuing education credits for CEPs (over 100% of the total requirement)
  • 18 continuing education credits for CFPs (60% of the total requirement)
  • 18 continuing education credits for CPWAs and CIMAs (45% of the total requirement)

The Learning Center offers engaging online self-study programs that busy professionals can take at their convenience to obtain necessary CE credits. Each course features podcasts, articles, FAQs, and videos from myStockOptions.com. They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning.

The Learning Center now has seven separate online self-study courses and exams:

Our CE courses add a lot of value to the content at myStockOptions.com, which has a big following among financial advisors, stock comp professionals, and stock plan participants. The value of our CE courses as efficient educational tools has also led some major financial institutions to use our Learning Center for internal training and their in-house certification programs.

CPE For Certified Public Accountants (CPAs)

Many states have a process for CPAs to self-determine whether a program qualifies as acceptable continuing education. For example, Massachusetts, which does not have a registration requirement for CPE programs, allows CPAs to self-determine and self-report their continuing education activities. CPAs are encouraged to take our courses and exams and determine whether they comply with their states' rules for CPE credits. (myStockOptions.com is not registered with NASBA or any state boards of accountancy.)

CE For CFA Charterholders

Chartered Financial Analysts (CFAs) are encouraged to take our courses and exams and include them when they self-document their continuing professional development in the online CE tracker on the CFA Institute website.

More CE At myNQDC.com

A sibling website of myStockOptions.com, myNQDC.com is the leading online resource of educational content on nonqualified deferred compensation (NQDC) for both NQDC professionals and NQDC plan participants. The continuing education programs in the website's Learning Center focus on two areas of nonqualified deferred compensation: Basics & Taxes and Enrollment & Distribution. Each program offers a comprehensive course of educational content and a rigorous 30-question exam. To take the exam, professionals must certify that they have read the content. They can earn credits only by achieving a passing score in the exam.

The courses and exams at myNQDC.com offer:

  • 6 Professional Achievement in Continuing Education (PACE) credit hours for Chartered Life Underwriters and for Chartered Financial Consultants
  • 12 Continuing Professional Education (CPE) hours for credentialed members of The American Society of Pension Professionals & Actuaries
  • 6 CE credits for CFPs

Alert: If you haven't yet seen the popular Forbes blog of our editor-in-chief Bruce Brumberg, you can catch up at the link and see what we've been up to during the pandemic vacation.


Equity Comp Survival Guide For Pandemic Times

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The COVID-19 pandemic has affected everyone, including employees with equity compensation.

  • You may need to sell company stock for cash to meet living expenses.
  • Your company's stock price has probably declined, leaving you wondering about your equity comp and financial planning.
  • You may be considering the best use of your stimulus payment from the IRS.
  • If you work for a small business that's seeking a forgivable loan from the Paycheck Protection Program, you need to understand the legal risks in the application and the use of the funds.

Here we present recent articles from the myStockOptions editorial team on these and other timely topics.

See also a full list of new and recently updated content at myStockOptions. Because Tax Season 2020 has been extended to July 15, it includes the fully updated tax-return content in our Tax Center.


7 Things To Know When You Sell Company Stock To Raise Cash

You may find yourself in a position where you suddenly need to come up with cash to meet living expenses or other urgent financial demands. One source of these funds can be proceeds from selling shares of your company's stock, whether acquired via the open market or equity compensation (e.g. stock options, RSUs, ESPPs). Before you sell your company shares, review this article's checklist of topics to understand on tax, company, brokerage firm, and SEC rules: 7 Things To Know When You Sell Company Stock To Raise Cash.


Insider Trading: How To Stay Out Of Trouble

If you do sell company stock quickly to raise cash, be careful. Depending on your access to confidential company information, trading company stock can actually get you into serious legal trouble, including criminal liability for insider trading. A new article at myStockOptions explains what you need to know: Insider Trading: How To Stay Out Of Trouble.


Market Volatility: A Survival Guide For Equity Comp

When stock markets become a rollercoaster and the economy is in a downturn, you need to hang in there and remember equity comp and company shares are best viewed as a long-term deal. Several articles at myStockOptions provide useful advice on coping with stock-price volatility, down markets, and job termination (whether layoffs or other types). These include:

You can find these articles and extensive related content in the sections Basics: Volatility and Job Events: Termination.


Donating Your Stimulus Check: 4 Key Tax Rules To Know

If you don't need the extra cash, one possible use of your stimulus payment from the IRS is to donate the money to a worthy cause. For this beneficence, you may get a tax deduction. Before you seek the deduction, learn the IRS rules that apply in an article at the Forbes.com blog of our editor-in-chief Bruce Brumberg.

For guidance on the tax deduction for donations of stock instead of cash, see the related FAQ at myStockOptions.


How To Avoid Legal Problems With Your Paycheck Protection Program Loan

Potentially forgivable loans to small businesses are available via the Paycheck Protection Program (PPP).

  • In an article at Forbes.com, we present advice from former federal prosecutors on avoiding legal problems with PPP loans.
  • In a separate Forbes.com article, we share insights from small-business attorneys about how to meet the conditions that make the loan forgivable, and how to use PPP loan funds in a way that avoids abusing the loan program.

Learning Center Offers CE Credits

Keep up your continuing professional education! In our Learning Center, myStockOptions has six courses and exams offering CE credits for several professional designations:

  • 30 continuing-education credits for Certified Equity Professionals (CEPs): 100% of the total requirement
  • 15 continuing-education credits for Certified Financial Planners (CFPs): 50% of the total requirement
  • 15 continuing-education credits for Certified Private Wealth Advisors (CPWAs) and Certified Investment Management Analysts (CIMAs): 37.5% of the total requirement
  • Chartered Financial Analysts (CFAs) and Certified Public Accountants (CPAs) are encouraged to take our courses and exams and include them, if possible, when they self-document their continuing professional education

Each course of study features podcasts, articles, and FAQs from myStockOptions. They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning.


Stock Sales: 7 Topics To Understand When You Sell Shares To Raise Cash Quickly

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These are challenging times for everyone. For reasons beyond your control, you may find yourself in a position where you suddenly need to come up with cash to meet living expenses or other urgent financial demands. The proceeds from selling shares of your company's stock, whether acquired via equity compensation or open-market purchases, can be a source of these needed funds.

However, when making stock sales you must always proceed with caution. Before you sell your company shares, review this checklist of topics to understand on tax, company, brokerage firm, and SEC rules.

1. Understand Capital Gains Tax Basics To Generate Capital Losses

When you sell shares, assuming they’re not in a retirement plan account (e.g. a 401(k) or IRA), you generate a capital gain or a capital loss. The calculation is the amount of the sale proceeds over or under your cost basis, i.e. what the shares cost to acquire plus any W-2 income you recognized for the equity compensation. For stock held over one year after a stock option exercise, vesting of restricted stock units (RSUs), or a purchase in an employee stock purchase plan (ESPP), the gain or loss is long-term, meaning a lower tax rate applies. Shares held for less than one year are taxed at short-term capital gains rates, similar to that of your salary income.

If you have a choice of company shares to sell, you want to first sell stock that generates a capital loss which you can harvest against capital gains. What that means is that you can net the capital losses against any current capital gains, with unused losses deducted against $3,000 of your ordinary income. The remainder of the loss is carried forward to future tax years. When you do not have shares to sell at a loss, your next choice is stock that has the smallest long-term capital gain.

2. Clearly Identify The Lot Of Shares You Want To Sell

When you hold company shares that you’ve received at various times, such as yearly RSU vesting or twice-yearly ESPP purchases, you want to identify at the time of sale which share lot is being sold. The default rule is “first in, first out” (FIFO), but you can choose. Any shares you received at a recent market high are the ones you want to sell for a loss. Make sure you get clarification on how to indicate specific lots to sell through your brokerage firm’s website.

3. Watch Out For Wash Sales

A “wash sale” is deemed to occur if you sell company stock at a loss but you have also separately purchased the same stock within 30 days before or after the sale. That triggers the special rules for wash sales. Under those rules, the loss and holding period are carried over to the replacement shares.

According to most experts, any restricted stock or RSU vesting 30 days before or after the loss sale would be considered a wash sale and trigger the related rules. Similar treatment applies to an option exercise, ESPP purchase, or dividend reinvestment plan on company stock. Those are all considered purchases.

4. Job Loss? Carefully Follow Your Company’s Post-Termination Stock Option Exercise Rules

You may intend to exercise stock options and immediately sell the shares to generate needed cash.  However, if you lose your job, vesting usually stops on all types of stock compensation. In that case, you must quickly exercise any outstanding vested stock options, typically within 90 days or less of your employment termination. As explained in the section Job Events at myStockOptions.com, if you do not exercise vested in-the-money stock options in time you will forfeit their value.

Alert: Check your stock grant agreement and your stock plan for the rules and exercise deadlines that apply to each option grant upon job loss. If anything is unclear, ask your company’s stock plan administrator.

5. Know Your Company’s Rules For ESPP Contributions

In an employee stock purchase plan, you can usually withdraw any accumulated funds that are waiting for the next purchase date. You need to check your company’s ESPP rules for how you do this. While an ESPP with a lookback and a 15% purchase discount can be an attractive investment in down markets, withdrawn ESPP funds can be another source of emergency funds. Furthermore, you can reduce or stop future ESPP contributions from your salary.

6. Be Mindful Of Holding Periods For ESPPs And ISOs

With stock from a purchase in a tax-qualified ESPP or an exercise of incentive stock options (ISOs), holding the shares for more than one year from enrollment/grant or two years from purchase/exercise gives you special tax treatment on the sale. Remember that the tax treatment is affected by selling those shares early. That’s called a disqualifying disposition, with different ramifications for ESPPs and ISOs. This is another reason to carefully choose and specify the lot of shares you want to sell, as explained in #2 above.

7. Beware Of Insider Trading

Understand that sometimes stock trades can actually get you into trouble. If you buy or sell shares of your company’s stock while you know material nonpublic information (MNPI), you are committing insider trading, which is illegal. Material nonpublic information refers to company secrets that, when made public, would move the company’s stock price up or down. This prohibition against trading on confidential inside information applies even if you are no longer employed by the company.

The type of information that could be considered MNPI is not always clear. However, common sense is a good guide. MNPI is any confidential company information that, once publicly known, could affect your company’s stock price in a positive or negative way. Examples include undisclosed financial results, a merger or acquisition that has not been announced, or a new product that has not been publicized. This prohibition also applies to confidential information you learn in your job about a corporate client, supplier, or other organization that you work with.

Alert: The SEC and the US Department of Justice are watching closely for insider trading related to the stock-market impacts of the COVID-19 pandemic and expect to pursue enforcement activities.

In addition to the securities laws about insider trading, your company may also have its own stock-trading pre-clearance rules, along with mandated blackout periods and window periods for stock trading.


The Top 3 Tax Numbers In 2020 That Employees With Equity Comp Should Know

tax planningTax-return season looms, meaning you will soon have to focus on reporting your 2019 income, including compensation from stock plans or gains from stock sales. However, before that, remember your basic tax planning for 2020.

At the start of each year, many key numbers in tax-law provisions are adjusted for inflation. It can be hard to spot those that matter to you. Below are the top three sets of tax figures that highly compensated employees should know: the Social Security income ceiling, your marginal tax rate, and how much you can put into your 401(k) plan.

1. Social Security Wage Base

Social Security tax (6.2%) applies to wages up to a maximum amount per year set annually by the Social Security Administration. Income above that threshold is not subject to Social Security tax (by contrast, Medicare tax is uncapped, with a rate of either 1.45% or 2.35%, depending on your income level). In 2020, the Social Security wage cap is $137,700, up slightly from $132,900 in 2019. This means the maximum possible Social Security withholding in 2020 is $8,537.40. Once your income is over that amount, you'll see 6.2% more in your paycheck or in the income you get from stock compensation, such as an NQSO exercise or RSU vesting.

2. Income-Tax Brackets And Withholding

The table below can help you understand how an additional amount of compensation would be taxed at your marginal tax rate (i.e. the percent of tax you pay for an additional dollar of income in your current tax bracket). This number tells you whether the taxes withheld according to your information on the newly revised Form W-4 will cover the total tax you will owe for 2020. To avoid "penalizing" additional income in your mind, be sure you know your effective or average tax rate.

RATE TAXABLE INCOME (SINGLE) TAXABLE INCOME (JOINT)
10% $0 to $9,875 $0 to $19,750
12% $9,876 to $40,125 $19,751 to $80,250
22% $40,126 to $85,525 $80,251 to $171,050
24% $85,526 to $163,300 $171,051 to $326,600
32% $163,301 to $207,350 $326,601 to $414,700
35% $207,351 to $518,400 $414,701 to $622,050
37% $518,401 or more $622,051 or more

Need To Pay Estimated Taxes?

Additional compensation received, such as a cash bonus or income from a nonqualified stock option exercise or vesting of restricted stock units, is considered supplemental wage income. For federal income-tax withholding, most companies do not use your W-4 rate. Instead, they apply the IRS flat rate of 22% for supplemental income (the rate is 37% for yearly supplemental income in excess of $1 million).

As shown by the table above, once you know your marginal tax-bracket rate, you may find the withholding rate of 22% may not cover all of the taxes that you will owe on supplemental wage income. In that case, you must either put extra money aside for the tax return you file in 2021, pay estimated taxes during 2020, or adjust your W-4 for your salary withholding as soon as possible to cover the shortfall.

3. Qualified Retirement Plans

In 2020, you can elect to defer up to $19,500 from your pay into qualified retirement plans, such as your 401(k). This is a $500 increase over the 2019 limit.

The total ceiling for deferrals to defined contribution retirement plans (including any additional part contributed from your employer) rose to $57,000 in 2020, a $1,000 increase. Both of these limits are $6,500 higher if you are 50 or older. The amount of compensation income that can be considered in the calculation for qualified deferrals is $285,000 in 2020. Check with your company’s 401(k) plan administrator for the process of making changes in your compensation deferral election.

Want to Defer More Income?

Look into whether your company has a nonqualified deferred compensation plan, sometimes called an excess 401(k) plan or other name. For more on these plans, see our sibling website myNQDC.com.

IRS Resources

Here are resources with more details on the many adjusted 2020 tax numbers:


myStockOptions conference

myStockOptions 2020 Advisor Conference: Save The Date!

The 2020 myStockOptions conference, Financial Planning for Public Company Executives & Key Employees, will be held on June 15 and 16 at the Hilton San Francisco Airport Bayfront. The conference is for financial advisors working with executives, directors, and highly compensated employees at public and private companies, as well as others interested in those topics. The event will start on the afternoon of June 15 with an advisor boot camp on equity comp. A full day of conference sessions with expert speakers will follow on June 16.

Our conference is recommended in The 20 Best Conferences For Financial Advisors To Choose From In 2020 by financial-planning thought leader Michael Kitces! Please contact us ([email protected]) to be notified when registration starts at the early-bird discount rate.


Year-End Planning: Strategies For Stock Options, Restricted Stock/RSUs, And ESPPs

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When the Santa hats and holiday lights are on, you know it's time for year-end financial and tax planning, especially if you have stock compensation, participate in an employee stock purchase plan (ESPP), or hold company shares.

Factors that impact your decisions in year-end planning include:

  • your situation, including cash needs that may prompt option exercises and/or stock sales
  • whether your decisions should be entirely tax-driven
  • what you did earlier in the year with your outstanding stock grant
  • whether you will owe additional taxes beyond what was withheld
  • your outlook for both your company's stock price and your job
  • multi-year projections for your income
  • your ability to spread the recognition of income from certain sources over this year and next
  • stock options that may expire soon
  • grants of stock options and/or restricted stock you expect in the year ahead
  • availability of an ESPP and the share purchase dates
  • stock trading windows and blackouts and/or ownership guidelines imposed by your company

Tax changes under the Tax Cuts & Jobs Act (tax reform) continue to affect year-end-planning decisions. Meanwhile, the election year ahead in 2020 presents uncertainty about the future of tax laws that affect financial- and tax-planning strategies.

Should Tax Rates Drive Decisions?

Consider the income tax rates and income ranges that fall within each tax bracket for this year and next. With year-end planning, you are looking for ways to shift income between years so that you are paying less in tax, while also considering the outlook for your company's stock.

If you are considering option exercises or stock sales at year-end, you should be aware of the thresholds for higher tax rates and consider keeping your income below them, if possible. In general, financial advisors suggest that investment objectives, expectations for stock-price performance, and personal financial needs—along with tax considerations—should drive your decisions.

7 Strategies

Below are seven strategies suggested from the many ideas in the year-end planning section of myStockOptions.com.

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1. You are planning to sell the stock at exercise late this year or early next year. You should calculate whether the ordinary income from a nonqualified stock option exercise will push you into a higher tax bracket and/or trigger the Medicare surtax on your investment gains, and what the taxes will be when the rates and bracket thresholds are adjusted for inflation in 2020. To break up the tax hit from an income spike, you may want to spread the same-day exercise/sale over the end of this year and the beginning of next year. Plus, you'll want to defer exercising into 2020 if you are confident your personal tax rate for the income triggered will be lower.

2. You are over or near the yearly maximum for Social Security. The Social Security wage base for 2019 is $132,900 ($137,700 in 2020). Social Security tax (6.2%) is owed only up to that income ceiling (Medicare tax is uncapped).

  • Yearly income already over that threshold: Exercise nonqualified stock options or stock appreciation rights in December without paying Social Security tax so that you can keep an extra 6.2% of the related income.
  • If you wait until January, your yearly wage base restarts at $0, and Social Security tax will again apply up to the new maximum for that year.

3. You expect next year to trigger the additional Medicare tax. The Medicare tax rate (normally 1.45%) is 2.35% for single filers with yearly compensation income of more than $200,000 (more than $250,000 for married joint filers). In addition, a 3.8% Medicare surtax applies to investment income, such as dividends and stock sale gains, for people in that same income range.

Example: Your multi-year projections of income show that you will trigger this surtax next year. You have company stock or other investments that you intend to sell soon, you may want to avoid the additional 3.8% tax by selling this year instead of next year.

4. Your restricted stock or restricted stock units (RSUs) vested this year. Unlike stock options, which trigger taxes when you choose to exercise them, restricted stock and RSUs usually give you no control over the timing of your taxes because you are taxed when the shares vest. The two exceptions to this are rare: opting to be taxed at grant instead by making a Section 83(b) election, which is unavailable for RSUs, or having RSUs with deferral features.

At vesting, you own the stock outright and have taxable W-2 income. Therefore, you can try to plan the timing and shifting of other income around this restricted stock/RSU income, as suggested in #1 above. See also the considerations in #6 about whether to continue holding the stock after vesting, which are similar to the question of whether to hold NQSOs exercised this year.

5. You exercised incentive stock options (ISOs) this year, you still hold the stock, and the stock price dropped substantially. While the changes in the AMT calculation under the TCJA make it much less likely you'll trigger the AMT, it is still important to calculate whether you should sell the stock this year (i.e. a disqualifying disposition) to eliminate any alternative minimum tax on the spread at exercise. Not doing this "escape hatch" analysis near the end of the year, especially if your company's stock price fell after an exercise earlier in the year, is a big mistake that many people with ISOs make. Should you decide to sell the stock, to avoid problems with the wash sale rule do not repurchase company shares within 30 days after the sale.

6. The stock price rose (or fell) after your exercise of nonqualified stock options (NQSOs) or your restricted stock/RSU vesting this year. The tax treatment is fixed at the time you exercise options or stock appreciation rights, and at the vesting of RSUs or restricted stock (assuming no Section 83(b) election for restricted stock). This is the tax rule for your federal and state income tax, regardless of the future stock price and whether you hold or sell the stock. You may have planned to sell the stock at price targets after holding it long enough to receive long-term capital gains treatment, but the stock price fell significantly. Therefore, you may want to consider selling the stock to receive a short-term capital loss, perhaps to net the loss against any capital gain, to diversify, or at least to cover any additional taxes that you will owe with your tax return for the spread at exercise or the value at vesting.

Alert: When you sell company stock at a loss to net against gains, be careful about the wash sale rule if you intend to buy the same stock again soon (see our related Forbes.com blog commentary: Year-End Stock Sales To Harvest Capital Losses: Beware Wash Sales). You should wait at least 30 days before repurchasing. However, you can sell appreciated stock for a gain and soon repurchase it without wash sale problems.

Alternatively, your stock price may have substantially increased, hitting your targets earlier than you expected. You may want to sell before the one-year mark because you are concerned that your stock has peaked or that tax rates will rise, or because you are worried about overconcentration in company stock. However, you may not want to pay short-term capital gains rates (i.e. the same rates as those for ordinary income). Check whether you have capital-loss carry-forwards from last year or short-term losses from this year that you can net against these gains. This is a good time to use up these losses against your short-term gains, which can also be created from sales of ESPP shares.

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7. You want to donate stock or cash. The end of the year is also a time when many people consider making gifts and donations of company stock. This can be made directly with company stock to a charity or through a foundation or donor-advised fund.

The increase in the standard deduction under tax reform can make donations worth more when you’re trying to still itemize deductions. Look at your prior year’s Form 1040 tax return on Schedule A to see if you are able to itemize or could if you bunch together donations this year to get over the standard deduction amount ($12,200 for individuals and $24,400 for joint filers in 2019). As we have explained before in this blog, once you understand the tax rules, stock donations are often a better approach for appreciated shares held more than one year than first selling them and then donating the cash.

Be sure the stock transfer is completed by December 31 to make it count for the current tax year. For electronic transfers from your brokerage account, the donation is recorded on the day it is received by the charity/foundation (not when you approve the transfer). With increased year-end activity at brokerage firms and charities, plan year-end stock gifts early and have ongoing communications with your broker to ensure the transfer takes place. Donations of private and pre-IPO company stock can take even longer with more documents to complete.


myStockOptions conference

myStockOptions 2020 Advisor Conference: Save The Date!

The 2020 myStockOptions conference, Financial Planning for Public Company Executives & Key Employees, will be held on June 15 and 16 at the Hilton San Francisco Airport Bayfront. The conference is for financial advisors working with executives, directors, and highly compensated employees at public and private companies, as well as others interested in those topics. The event will start on the afternoon of June 15 with an advisor boot camp on equity comp. A full day of conference sessions with expert speakers will follow on June 16.

Our conference is recommended in The 20 Best Conferences For Financial Advisors To Choose From In 2020 by financial-planning thought leader Michael Kitces! Please contact us ([email protected]) to be notified when registration starts at the early-bird discount rate.


Year-End 2019: myStockOptions Provides Guidance On Tax Planning Ahead Of Election Year 2020

EJSBTuIWoAAc76ZAlong with colored lights, Christmas trees, and office holiday parties, year-end is also a key time for financial and tax planning, especially for the millions of employees who have stock compensation or holdings of company shares.

Tax changes introduced in 2018 by the Tax Cuts & Jobs Act (tax reform) continue to affect their year-end-planning decisions. Meanwhile, the election year ahead in 2020 presents uncertainty about the future of tax laws that affect financial- and tax-planning strategies.

To help keep the season merry and bright, myStockOptions.com provides education and guidance on major issues, choices, and innovative financial-planning strategies for the end of 2019 and the start of 2020. This content is available in the website's section Financial Planning: Year-End Planning and through content licensing.

Tax Brackets And Rates Affect Year-End Planning For Equity Compensation And Company Shares

Financial planning at year-end 2019 is more important than ever for employees with equity compensation who are:

  • evaluating whether to exercise stock options
  • planning to sell shares acquired from restricted stock, restricted stock units, or an employee stock purchase plan (ESPP)
  • donating company stock to charities

Multi-year planning for income from stock compensation and stock sales is especially crucial. "You can control the timing of stock sales and option exercises, and you know when restricted stock/RSUs will vest," notes Bruce Brumberg, the Editor-in-Chief of myStockOptions.com. "Employees with equity grants, employee stock purchase plans, and company shares should be aware of the 2019 and 2020 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." These employees, for example, 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.

"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," continues Mr. Brumberg. "If your income in the next calendar year will be less than the level that triggers those higher rates, waiting until 2020 to sell stock could give you a capital gains tax rate of just 15% and no Medicare surtax."

Factors That Drive Year-End Decisions

However, tax rates should not be the only consideration, cautions Mr. Brumberg. "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 myStockOptions.com, the section Year-End Planning has been fully updated for 2019, including revisions for what's different after tax reform. This content includes the following articles and FAQs.

Articles

FAQs

Alongside the core year-end articles and FAQs, other FAQs in the year-end section answer advanced tax-related questions, including:

All of these questions, and many others, are answered in the section Financial Planning: Year-End Planning. In addition, the calculators and modeling tools at myStockOptions.com 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 myNQDC.com, a separate sibling publication of myStockOptions.com. Key year-end content there includes the following FAQs:

Corporate Licensing Available

For companies, education is vital for ensuring that stock compensation motivates and retains highly valued employees and executives. The expert yet reader-friendly content at myStockOptions.com is ideally suited for licensing by companies and stock plan providers for their stock plan participants. For more information, visit myStockOptions.com, email [email protected], or call 617-734-1979. Content from myNQDC.com on nonqualified deferred compensation plans is also available for licensing.


myStockOptions 2020 Advisor Conference: Save The Date!

The 2020 myStockOptions conference, Financial Planning for Public Company Executives & Key Employees, will be held on June 15 and 16 at the Hilton San Francisco Airport Bayfront. The conference is for financial advisors working with executives, directors, and highly compensated employees at public and private companies, as well as others interested in those topics. The event will start on the afternoon of June 15 with an advisor boot camp on equity comp. A full day of conference sessions with expert speakers will follow on June 16.

Our conference is recommended in The 20 Best Conferences For Financial Advisors To Choose From In 2020 by financial-planning thought leader Michael Kitces! Please contact us ([email protected]) to be notified when registration starts at the early-bird discount rate.


Capital Gains On Stock Sales: 6 Ways Under The Tax Code To Defer Or Pay No Capital Gains Tax

Gettyimages-178605451-612x612Sooner or later, assuming the company's stock price rises, employees who acquire shares from equity compensation must sell them to realize the financial benefits of their grants. These could be shares that appreciated substantially from a stock option exercise, restricted stock/RSU vesting, or ESPP purchase long ago. They could be founder's stock or shares from equity compensation in a startup that later turned into a hot IPO company.

While most securities held over one year qualify for the favorable rate on long-term capital gains, the total capital gains tax can still be significant. However, the US tax code provides a few perfectly legal ways, depending on your income, financial goals, and even life expectancy, to defer or pay no capital gains tax, maximizing the benefits of your grants and letting you put away more in your piggy bank.

Most of these ways to defer or eliminate capital gains tax are considered tax expenditures: tax-code provisions created to encourage certain activities or benefit certain categories of taxpayers. Below we explain six of these provisions (ideally considered only with advice from a financial or tax planner on your personal situation).

1. The 10%–15% Tax Bracket

For people in the 10% or 12% income tax bracket, the long-term capital gains rate is 0%. Under the Tax Cuts & Jobs Act, which took effect in 2018, eligibility for the 0% capital gains rate is not a perfect match with the income ceiling for the 12% income tax rate. The income thresholds for the 0% rate are indexed for inflation:

  • in 2019, $39,375 (single filers) and $78,750 (joint filers)
  • in 2020, $40,000 (single filers) and $80,000 (joint filers)

Before you believe you quality for this special 0% capital gains rates, or think you can shuffle your stock to someone else in a lower tax bracket who can sell to get the 0% rate, you want to be sure you don’t trip over the tax rules. For example, the net gains from your stock sale count against the income limit. Should you decide this is a good year to convert a traditional IRA to a Roth IRA, that income counts, too. The “kiddie” tax is triggered should the gifted stock be sold by a child under the age of 19 (for full-time students, under the age of 24).

2. Using Tax Losses

Capital losses of any size can be used to offset capital gains on your tax return to determine your net gain or loss for tax purposes. This could result in no capital gains at all to tax. Called tax-loss harvesting, this is a popular strategy. While only $3,000 of net capital losses can be deducted in any one year against ordinary income on your tax return, the remaining balance can be carried over to future years indefinitely. When you follow this strategy in selling losers, you want to be careful to avoid the rules about “wash sales” should you plan to soon repurchase the same stock. (See our blog commentary on this: Year-End Stock Sale To Harvest Capital Losses: Beware Wash Sales!)

3. Stock Donations

Planning to make a big donation to a qualifying charity? Instead of selling the appreciated stock, paying the capital gains tax, and then donating the cash proceeds, just donate the stock directly. That avoids the capital gains tax completely. Plus, it generates for you a bigger tax deduction for the full market value of donated shares held more than one year, and it results in a larger donation.

With donations that put you over the yearly standard deduction amount, the stock donation also reduces your overall taxable income. You could donate the shares to a donor-advised fund if you’re uncertain about your philanthropic goals for all the stock. If you’re fortunate enough to be wealthy, consider a charitable remainder trust or private foundation.

4. Qualified Small Business Stock

Private company shares held for at least five years that are considered qualified small-business stock (QSB) may be eligible for an income exclusion of up to $10 million or 10 times their cost basis. This is separate from the approach of rolling over your capital gains by reinvesting them within 60 days of sale in another startup. For the stock to qualify, the company must not have gross assets valued at over $50 million when it issued you the shares. For more details on both the rollover deferral and the 100% gain exclusion strategies for QSB sales, see a related article on myStockOptions.com.

5. Qualified Opportunity Zones

The Tax Cuts and Jobs Act created “Opportunity Zones” to encourage investment in low-income distressed communities that need funding and development. This is the newest way to defer and potentially pay no capital gains tax. By investing unrealized capital gains within 180 days of a stock sale into an Opportunity Fund (the investment vehicle for Opportunity Zones) and holding it for at least 10 years, you have no capital gains on the profit from the fund investment.

For realized but untaxed capital gains (short- or long-term) from the stock sale:

  • The tax on those capital gains is deferred until the end of 2026 or earlier should you sell the investment.
  • For capital gains placed in Opportunity Funds for at least 5 years until the end of 2026, your basis on the original stock investment increases by 10%. The basis increase goes to 15% if invested at least 7 years until that date (this means you must make the investment by December 31, 2019, to potentially get the 15% basis bump).

The new tax incentive is complex and controversial. It faces potential legislative changes. Unresolved issues also remain on some aspects, as shown by FAQs and ongoing guidance from the IRS.

6. Dying With Appreciated Stock

While this may seem like an extreme planning technique, hear us out. The standard calculation for capital gains in your retail brokerage account (not securities in a 401(k), IRA, or other tax-qualified retirement plan) after commissions and fees is:

capital gains = sale proceedscost basis [purchase price of stock]

Should you sell the stock during your lifetime, the net proceeds in this equation are your capital gains (or losses). Should you gift the stock, the cost basis carries over to the new owner.

Yet when you die before selling or gifting, this cost basis in most situations is “stepped up” to the fair market value on the date of death. The stock escapes the capital gains tax on the price increase during your lifetime, regardless of the size of your estate. (Any potential capital loss deduction also goes away should the stock price have dropped since purchase.) Thus, no taxable gain is recognized when the inherited shares get sold at no higher than the death-date price.

All the 2020 Democratic presidential candidates seem to be calling for the elimination of this provision. This tax rule, which was not changed when the estate tax income exemption amount increased, is viewed as a tax loophole for super-wealthy people who create sophisticated trusts and estate-planning strategies. However, this tax treatment at death to step up the basis is available for everyone and does eliminate (or reduce) the taxes your heirs and beneficiaries pay.


myStockOptions Financial-Planning Conference Delivers Practical, Specialized Knowledge With Engaging Style

To register for our expanded 2020 financial-planning conference, with all new sessions and a pre-conference stock comp bootcamp, see the conference website. Discounted price for early registrations until April 20!

Session

"The only conference of its kind: a tremendous opportunity to learn from the best in executive comp financial planning."

"Opened my mind to new ways to manage stock comp!"

"One-stop conference to learn everything about long-term incentive comp."

These were just some of the glowing attendee responses to our one-day conference Financial Planning for Public Company Executives & Directors, held on June 18 in the San Francisco and Silicon Valley area. The event attracted financial advisors from all over the United States: professionals who work with or seek to advise executives, directors, and key employees who have stock compensation, holdings of company stock, and other company benefits, such as nonqualified deferred compensation. With its delivery of practical expertise, the conference was approved to offer 8.0 continuing education credits for CFP® professionals and for the CIMA® and CPWA® certifications of the Investments & Wealth Institute®. Certified Equity Professionals (CEPs) who attended earned 7.0 continuing education credits.

Attendee Evaluations: "Wisdom, Expertise, And Good Easygoing Vibes"

The event received many positive reviews from attendees. "I thought it was lot of diverse information from very reputable sources," said one attendee afterwards. "It was good to hear about trends in the industry and learn from colleagues." One advisor, from a major brokerage firm, particularly liked "the networking" and "appreciated the opportunity to meet with RIAs we work with and ones we do not." 

"I would definitely recommend this conference to anyone on the advisory side of working with public-company executives," asserted another attendee. "myStockOptions.com is still the best resource I've found as an advisor who serves this niche market."

A selection of other attendee comments:

  • "Wisdom, varied perspectives, expertise, and good easygoing vibes."
  • "Great content and timely for my practice."
  • "Eight hours of CFP continuing education in one day—very time-efficient."
  • "The presenters were at the highest level."

The enthusiastic feedback and constructive suggestions we received will help to shape similar events in the future. The 2019 conference built upon the sold-out success of our 2018 conference, which was held in Boston.

We at myStockOptions.com thank those who attended, our speakers, and the conference's sponsors: Columbia Threadneedle Investments, Fidelity Charitable, StockShield, Charles Schwab, StockOpter, UC Berkeley Extension, Social Security Solutions, and the National Association of Stock Plan Professionals. The conference location, the Hilton San Francisco Airport Bayfront, was an excellent, convenient venue for the event.

Conference panel

Conference Sessions: Engagement With Expertise

With an engaging range of practical topics, the talks and panel discussions of the 2019 conference featured a distinguished speaker lineup of top industry experts. Many are leading advisors involved with financial, tax, and legal planning for stock compensation, holdings of company shares, and executive retirement plans.

In a focused yet relaxed environment for learning and networking, attendees enjoyed the following sessions:

  • Leading Financial Advisor Reflects On His Career Working With Executives: Tim Kochis, Founder and CEO of Kochis Global (former CEO of Aspiriant)
  • Tax Myths And Facts With Equity Compensation
  • Trends In Stock And Executive Compensation: What Stock Plan Participants Need And Want, And How Advisors Can Help
  • Important SEC Rules And Legal Developments Impacting Financial Planning For Stock And Executive Compensation
  • Attracting And Retaining Individuals Who Receive Company Stock And/Or Options
  • Planning Strategies For Stock Options, Restricted Stock/RSUs, Performance Shares, And Company Stock Holdings
  • Estate Planning And Charitable Giving With Company Stock And Equity Comp
  • Rule 10b5-1 Trading Plans: Cornerstone Of Legal Protection For Stock Diversification
  • Strategies For Concentrated Positions In Company Stock
  • Stock Grant, Employment, And Severance Agreements: Key Documents For Advisors To Understand And How To Help Clients Avoid Big Mistakes
  • Donor Advised Funds Versus Charitable Foundations: What’s Best For Your Client
  • Nonqualified Deferred Compensation: What Advisors Must Know To Advise Executives
  • Pre-IPO Company Financial Planning

myStockOptions Conference Meets A Strong Need Among Advisors

Based on feedback from financial planners and wealth advisors who use the content, tools, and advisor directory at myStockOptions.com, our financial-planning conference meets a strong but previously unmet need for guidance in these subject areas. Moreover, a recent national survey of 1,000 stock plan participants by Charles Schwab found that while half understand the long-term value of their equity compensation, many are hesitant about exercising stock options or selling shares because of anxiety that they will make a costly mistake. The survey suggests that improved education and guidance would reduce this fear factor.

Bruce Brumberg"Financial-planning clients and their families look to equity comp or company stock holdings to fund important life goals," observes Bruce Brumberg, the editor-in-chief of myStockOptions.com (pictured). "They rely on advisors for help in how to maximize, preserve, and transfer their wealth and how to prevent them from making big mistakes."

Accordingly, our conference team selected stock comp topics that are especially important for advisors to understand in serving financial-planning clients and public and pre-IPO companies. Our speakers and panelists shared a wide range of knowledge, insights, and experiences that completely met our high expectations and the goals of the conference. We hope that our conference attendees found the event a boost for their professional development, helping them deepen client relationships, further develop their reputations, gain more client referrals, and advise more employees with stock comp in ways that help them achieve their financial and life goals.

The mission of the conference is also one of our perpetual missions at myStockOptions.com: to provide an independent, unbiased source of educational content and tools on all types of equity compensation. Full access to our website is available via our Premium or Pro membership levels. Additionally, our extensive and engaging educational content on all aspects of equity compensation can be licensed by stock plan providers and companies for their plan participants. The content includes not just our easy-to-understand articles and FAQs but also our videos, podcasts, modeling tools, and fun quizzes on many different topics.


Leading Financial-Planning Experts Will Speak At myStockOptions.com National Conference

Organized by myStockOptions.com, the one-day conference Financial Planning for Public Company Executives & Directors is a must-attend event for professionals working with or seeking to advise executives, directors, and high-net-worth employees who have stock compensation and holdings of company stock. Being held in the San Francisco–Silicon Valley area on June 18, 2019, this unique conference is sponsored by some of the leaders in the financial-planning industry, including Fidelity Charitable, Charles Schwab, Columbia Threadneedle Investments, StockShield, and StockOpter. Continuing education offerings include 8.0 CFP® credits and 7.0 CEP credits.

Date: June 18, 2019
Place: Hilton San Francisco Airport Bayfront
Time: 8:00am–6:00pm
Register: https://www.mystockoptions.com/conference

Registrations by May 18 receive a $300 early-bird discount. The Hilton San Francisco Airport Bayfront is conveniently located at the San Francisco International Airport (SFO). Rooms at a specially discounted rate have been reserved for June 16–20 at the hotel, which offers free airport shuttle transportation.

Praise From Past Attendees

The 2019 conference follows the sold-out success of the 2018 conference, held in Boston. "The [2018] conference was excellent—packed with information and lessons for advisors to apply in their practices," said William Baldwin of Argent Wealth Management (Waltham, MA), a past national chair of the National Association of Personal Financial Advisors (NAPFA). "In many other conferences I attend, the presenters only scratch the surface of their topics," said Aaron R. Petersen of Capital Group Private Client Services (Los Angeles, CA), another 2018 attendee. "It was refreshing to see that many of the presenters went the next step or two deeper into their topics."

2019 Conference: Fresh Topics, New Speakers

The 2019 conference is by no means a repeat performance of the 2018 event. With a fresh range of topics, talks and panel discussions will feature a distinguished speaker lineup of top industry experts. Many are leading advisors involved with financial, tax, and legal planning for stock compensation and holdings of company shares. The conference agenda comprises the following sessions:

  • Leading Financial Advisor Reflects On His Career Working With Executives, an interview of Tim Kochis, Founder and CEO of Kochis Global (former CEO of Aspiriant)
  • Tax Myths And Facts With Equity Compensation
  • Trends In Stock And Executive Compensation: What Stock Plan Participants Need And Want, And How Advisors Can Help
  • Important SEC Rules And Legal Developments Impacting Financial Planning For Stock And Executive Compensation
  • Attracting And Retaining Individuals Who Receive Company Stock And/Or Options
  • Planning Strategies For Stock Options, Restricted Stock/RSUs, Performance Shares, And Company Stock Holdings
  • Estate Planning And Charitable Giving With Company Stock And Equity Comp
  • Rule 10b5-1 Trading Plans: Cornerstone Of Legal Protection For Stock Diversification
  • Strategies For Concentrated Positions In Company Stock
  • Stock Grant, Employment, And Severance Agreements: Key Documents For Advisors To Understand And How To Help Clients Avoid Big Mistakes
  • Donor Advised Funds Versus Charitable Foundations: What’s Best For Your Client
  • Nonqualified Deferred Compensation: What Advisors Must Know To Advise Executives
  • Pre-IPO Company Financial Planning

"This is the only conference addressing and focused solely on financial planning for executives and directors," says Kent T. Hickey of Legacy Planning Partners (Allentown, PA). "My practice significantly changed as a result of the valuable information shared by industry leaders. Since I returned from the 2018 conference, fellow planners and clients have sought my input on executive compensation. Already looking forward to the next conference!"

"Excellent content," adds Madeline Van Hoorickx of UBS Financial Services (San Jose, CA). "I haven’t come across anything else that is geared toward advisors like this."

"The sold-out success of our 2018 conference shows the need for this type of specialized, exclusive conference and education for advisors," explains Bruce Brumberg, the editor-in-chief of myStockOptions.com, the creator and organizer of the conference. He encourages attendees to register as soon as possible. "It's the truth, not a mere marketing ploy, when we say that space is limited and filling quickly!"

You can register and make hotel reservations now at the conference website, where you can also read more praise from attendees for last year’s sold-out conference. Please feel free to contact us for more information (617-734-1979, [email protected]).

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Give Smart: Year-End Donations Of Stock Instead Of Cash Make Even More Sense After Tax Reform

Whatever holidays you celebrate, this is the season of giving. If you're charitably inclined and hold meaningful amounts of appreciated stock, such as shares acquired from a stock option exercise, restricted stock/RSU vesting, or ESPP purchase, donating stock instead of cash can be a smart tax-planning move. Given the changes in the rules for itemized deductions under the Tax Cuts & Jobs Act (TCJA), stock donations can reduce your taxes by giving you total deductions that exceed your new increased standard deduction amount.

Tax Rules For Stock Donations

After you have held stock for more than one year and its price has risen, at the time of the donation you get a tax deduction equal to the fair market value of the stock (not its cost basis). If the sale of the appreciated shares would have triggered long-term capital gains, your deduction is up to 30% of your adjusted gross income (20% for family foundations), and you can carry forward higher amounts for five years. The Tax Cuts & Jobs Act increased the income limit for charitable contributions of cash to public charities (from 50% to 60%), but not for charitable contributions of stock. Shares gifted to donor-advised funds receive the same tax treatment.

After Tax Reform: Using Company Stock To Bunch Donations

The advice from many experts is to bunch donations so that your itemized deductions go beyond the TCJA standard deduction amounts in 2018 of $12,000 for individuals and $24,000 for joint filers (adjusted annually for inflation). If you do not routinely exceed the standard deduction, you can get over it by bunching donations of stock to charities or a donor-advised fund.

Benefits Of Stock Donations

With a charitable gift of appreciated securities held long-term, the donation you make and the deduction you get are greater than they would be if you were to sell the shares and donate the cash proceeds instead. That is because when you donate shares, you avoid paying the capital gains tax.

Donation Example

Suppose you can either (1) donate $50,000 in stock held more than one year or (2) sell the stock first and donate the proceeds. The stock has a cost basis of $10,000. You have a 40% combined federal and state tax rate on your income and a combined 20% tax rate on capital gains.

Example factors Stock donation Cash donation
Combined federal and state income taxes 40% 40%
Tax rate and amount for selling stock Not applicable 20% / $8,000 (0.2 x $40,000)
Net amount to donate $50,000 $42,000
Tax savings $20,000 $16,800

Be Careful With Year-End Timing

To obtain a deduction for the current tax year, the stock transfer must be completed by December 31. For electronic transfers from your brokerage account, the donation is recorded on the day it is received (not when you approve the transfer). Plan your year-end stock gifts as early as possible and have ongoing communications with your broker to ensure that the transfer takes place.

If you have valuable stock in a pre-IPO company, you will want to start the process especially early. Donations and transfers of stock in a private company can take longer than those for stock in public companies and can raise valuation issues.

Special Issues With Stock Compensation

For a charitable donation of company stock acquired from equity compensation, the tax treatment is the same as it is for donations of any stock to a qualified charity or donor-advised fund. If the donated shares were acquired from incentive stock options (ISOs) or an employee stock purchase plan (ESPP), be sure you donate the shares after you have met the related special holding periods for ISO and ESPP stock (more than two years from grant and one year from exercise/purchase). Executives and directors will also want to review the Section 16 and Rule 144 requirements before gifting or donating company stock.

More Ideas For Financial Planning With Stock

For other ideas on year-end financial and tax planning, see our year-end articles and FAQs at myStockOptions.com. Our section on estate planning has additional content related to gifts and donations, such as charitable remainder trusts.


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

This is the first year-end season when taxpayers with stock compensation must consider the changes introduced in 2018 by the Tax Cuts & Jobs Act (TCJA). Fortunately, the new tax law doesn’t make any huge changes in the usual year-end steps that you and your financial advisor should consider when you have stock options, restricted stock/RSUs and company stock holdings.

However, there are some key points to know and discuss with your advisor. For example, the new 22% withholding rate on income from stock comp and cash bonuses (lowered from 25%) could mean you’ll end up with a big tax bill in April.

Two Major Types Of Tax Changes

“Tax reform” is the blanket term often applied to the TCJA, which made two major types of changes in the tax laws for individuals. In some areas, the TCJA made straight-up tax cuts. In others, it restructured or eliminated tax provisions. Each of those two categories affects your year-end strategies differently, as explained below.

Tax-Cut Provisions

The TCJA modified the income-tax rate and income ranges of each tax bracket, including the reduction of the top income-tax rate from 39.6% to 37%. However, we still have the same number of tax brackets (lucky seven), and the capital gains tax and the Medicare surtaxes remain unchanged.

What this means: Whenever you consider exercising stock options or selling shares at year-end (or recognize any extra income), you need to know your tax bracket. Even with the lower tax rates that took effect in 2018, you still want to consider the income thresholds that would trigger a higher tax rate and the Medicare surtax on investment income.

In general, you want to do the following multi-year planning, just as you did before the TCJA:

  • Keep your yearly income under the thresholds for higher tax rates and know the additional room you have for more income in your 2018 and 2019 tax brackets.
  • Recognize income at times when your yearly income and tax rates may, according to your projections, be lower.
Example: You’re a joint filer with $200,000 of taxable income in 2018 and projected taxable income of $180,000 in 2019, putting you in the 24% tax bracket. You have a $120,000 spread on your nonqualified stock options. By exercising just enough options in 2018 to generate $50,000 of additional income (giving you $250,000 for the year), you can then exercise the remaining options in 2019. This lets you avoid the higher 32% tax bracket and both the additional Medicare tax (0.9%) on the income at exercise and the Medicare surtax on investment income (3.8%) when you sell the shares.
2018 Salary $200,000 $200,000
2018 NQSO exercise income $50,000 when exercised over 2 years $120,000 when income in 1 year
Total taxable W-2 income $250,000 $320,000
Marginal tax bracket 24% 32%
Medicare taxes at sale and exercise no yes

The flat withholding rates for supplemental wages, including stock compensation, are tied to the seven income-tax brackets, so those changed too. For income up to $1 million in a calendar year, the withholding rate is now 22%. For amounts of income in excess of $1 million during a calendar year, the withholding rate is 37%.

What this means: The 22% rate of withholding may not cover all of the taxes you will owe on income from an exercise of nonqualified stock options (NQSOs) or a vesting of restricted stock or restricted stock units. You must therefore know the tax bracket for your total income and assess the need to (1) put money aside to pay the additional taxes with your tax return, (2) increase the withholding on your salary, or (3) pay estimated taxes.

Tax Reform/Restructuring Provisions

The TCJA significantly raised the alternative minimum tax (AMT) income exemption amount and the income point where it starts to phase out. This greatly alters the outcome of the AMT calculation for many taxpayers. The new tax law also imposed a cap of $10,000 on the amount of state and local taxes (SALT) available for itemized deductions, and it eliminated personal exemptions.

What this means: It’s much less likely that you will trigger the AMT with an exercise-and-hold of incentive stock options (ISOs), and if you did you will be able to recover it with the AMT credit more quickly than before. At year-end, you want to assess whether to sell shares acquired from an ISO exercise earlier in the year. You evaluate whether to sell those shares to avoid the AMT or exercise more ISOs up to the income threshold that would trigger the AMT. Because of the changes in the AMT calculation under the TCJA, you now have much more room to exercise ISOs and hold the shares beyond the year of exercise without triggering the AMT.

The TCJA also raised the standard deduction to $12,000 for individuals and $24,000 for joint filers. On your tax return, you can either take the standard deduction or itemize.

What this means: If you are holding shares that have greatly appreciated in value, donations of company stock, whether directly to a charity or donor advised fund (DAF), can be a tax-efficient way to both make the donation and get you over the $12,000/$24,000 point where it makes sense to itemize. If you’re not always over that amount, you may want to consider bunching donations together in a single year to exceed it.

Taxes Should Not Control Decisions

Tax reform should not be the primary factor in decision-making at year-end. In fact, tax rates in general should never be the only 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.

For more ideas on year-end planning for employee stock options, restricted stock/RSUs, performance shares, or an ESPP, see the year-end-planning section of myStockOptions.com.


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 myStockOptions.com 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 myStockOptions.com, 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.

Articles

FAQs

In addition, the calculators and modeling tools at myStockOptions.com 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 myNQDC.com, a separate sibling publication of myStockOptions.com.


What To Know About Tax Reform And What To Expect From The 'Tax Reform 2.0' Proposals

"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:

"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.


Leading Industry Experts Speak At Sold-Out myStockOptions Financial-Planning Conference

Organized by myStockOptions.com and held on June 18, the one-day conference Financial Planning for Public Company Executives & Directors attracted financial advisors from all over the United States. These professionals work with or seek to advise executives, directors, and high-net-worth employees who have stock compensation, holdings of company stock, and other company benefits, such as nonqualified deferred compensation.

The conference was a big success. All available space was sold out, and the event received glowing reviews from attendees. myStockOptions thanks those who attended, our speakers, and the conference's sponsors: Eaton Vance, Fidelity Charitable, StockShield, StockOpter, Social Security Solutions, and the NASPP.

The enthusiastic feedback and constructive suggestions we received will help to shape similar events in the future. “Excellent content,” said an advisor after the event. “I haven’t come across anything else that is geared toward advisors like this.” Many attendees told us that the coverage of the presented topics was just right: “Technical but not too basic or overly technical,” wrote one. Another praised the event as the “only conference addressing and focused solely on financial planning for executives and directors,” and one advisor even called it the “best conference focused on executive/equity comp.”

A selection of other attendee feedback:

  • “A huge amount of practice-relevant information in a very efficient and engaging format.”
  • “The speakers were very informative and didn’t focus too much on the basics—got into deeper conversations.”
  • “Consistently high quality.”
  • “It’s hard to find seminars that provide this much detail.”

Conference Sessions: Engagement With Expertise

Leading Investment Manager Reveals Current Strategies for High-Net-Worth Clients (Paul Bouchey, Parametric Portfolio Associates, interviewed by Bruce Brumberg of myStockOptions.com)

Trends in Stock and Executive Compensation: What They Mean for Financial Advisors (Richard Friedman, Ayco Company)

Important Tax, SEC, and Legal Developments Impacting Financial Planning for Stock and Executive Compensation (Bruce Brumberg, myStockOptions; Susan Daley, Perkins Coie)

Leading Financial Advisor Reflects on His Career Working with Executives (Tim Kochis, Kochis Global, interviewed by John Barringer of Executive Wealth Planning Partners)

Financial & Tax Planning Strategies for Stock Options, Restricted Stock/RSUs, Performance Shares, and Company Stock Holdings (Caroline Emswiler, Wealth Financial Consultants; William Baldwin, Argent Wealth Management; Jackie Kunkel, UBS Financial Services; Kristin McFarland, Darrow Wealth Management; moderator: Bill Dillhoefer, Net Worth Strategies)

Estate Planning & Charitable Giving With Company Stock & Equity Comp (Geoff Zimmerman, Mosaic Financial Partners; Kirsten Howe, Absolute Trust Counsel; Matthew Connor, Fidelity Charitable)

Rule 10b5-1 Trading Plans: Cornerstone of Legal Protection for Stock Diversification (Michael Andresino, Posternak Blankstein & Lund; Mark Bach, Morgan Stanley)

Retirement Distribution Planning for Executives: Key Role for Stock Compensation and Holdings of Company Stock, Executive Retirement Plans, and NUA (Chuck Steege, SFG Wealth Planning Services)

Strategies for Concentrated Positions in Company Stock (Dave Gordon, Eaton Vance; Bob Gordon, Twenty-First Securities; Brian Yolles, StockShield; moderator: Tim Kochis, Kochis Global)

Pursuing the Equity Compensation Opportunity: Attracting and Retaining Individuals Who Receive Company Stock and/or Options (John Barringer, Executive Wealth Planning Partners; Bill Dillhoefer, Net Worth Strategies)

Conference Met A Strong Need Among Advisors

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From our experience with financial planners using the content, tools, and advisor directory at myStockOptions.com, we sensed a strong need for this type of event. Moreover, a recent national survey of 1,000 stock plan participants found that while half understand the long-term value of their equity compensation, many are hesitant about exercising stock options or selling shares because of anxiety that they will make a costly mistake. The survey suggests that improved education and guidance would reduce this fear factor.

"Financial-planning clients and their families look to equity comp or company stock holdings to fund important life goals," said Bruce Brumberg (pictured at the right), the editor-in-chief of myStockOptions.com, during his introductory remarks. "They rely on advisors for help in how to maximize, preserve, and transfer their wealth and how to prevent them from making big mistakes."

Accordingly, our conference team selected stock comp topics that are especially important for advisors to understand in serving their financial-planning clients. Our speakers and panelists shared a wide range of knowledge, insights, and experiences that completely met our high expectations and the goals of the conference. We hope that our conference attendees found the event a boost for their professional development, helping them deepen client relationships, further develop their reputations, gain more client referrals, and advise more employees with stock comp in ways that help them achieve their financial and life goals.

The mission of the conference is also one of our perpetual missions at myStockOptions.com: to provide an independent, unbiased source of educational content and tools on all types of equity compensation. Full access to our website is available via our Premium or Pro membership levels. Additionally, our extensive and engaging educational content on all aspects of equity compensation can be licensed by stock plan providers and companies for their plan participants. The content includes not just our easy-to-understand articles and FAQs but also our videos, podcasts, modeling tools, and fun quizzes on many different topics.


Survey: Gap Between Equity Comp Aspiration And Action Shows Need For Employee Education And Financial Advice

Knowledge is power. Most importantly, it reduces the fear of the unknown. In the context of stock plans, this is illustrated in the results of an interesting recent national survey of 1,000 stock plan participants by Schwab Stock Plan Services. The survey found that while half understand the long-term value of their equity compensation, many are hesitant about exercising stock options or selling shares because of anxiety that they will make a costly mistake. The survey suggests that improved education and guidance would reduce this fear factor.

The survey revealed that 76% of the participants consider equity compensation to be part of their long-term financial plan. Over a third of the participants (36%) report that stock comp was one of the reasons why they took their current job. Most also said equity compensation helps to keep them at their company, a great example of stock comp's employee-retention value.

Below we present selected results of the survey, including a few graphs from the published survey results.

Most Participants Do Not Act On Equity Comp

Astoundingly, only 24% of the plan participants that Schwab surveyed have actually exercised employee stock options or sold shares acquired from equity comp. Among the rest, 34% admit to being worried about selling in adverse market conditions, and another 34% say they fear the tax consequences of making an uninformed or bad decision. Almost half (48%) are afraid of making a mistake when exercising or selling.

Personal Importance Of Stock Compensation

Many participants view equity compensation as part of their overall financial strategies. These include:

  • getting needed cash (35%)
  • making a big purchase (28%)
  • planning for retirement (11%)

ReasonsMost say their equity compensation helps them feel

  • less stressed about finances (76%)
  • more prepared for retirement (63%)

Boomers (84%) and GenXers (81%) tend to see equity compensation as a long-term deal; by contrast, 31% of Millennials expect to use their stock comp in the short term.

Financial Confidence Is A Major Issue

Nevertheless, only half of the respondents say they are confident in their ability to make the right decisions about their stock comp on their own. Among the majority who have never exercised options or sold shares, the following reasons for their inaction were prevalent:

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Confidence levels vary among the major demographic groups:

  • Millennials, 58%
  • GenXers, 44%
  • Boomers, 39%

More Stock Plan Education And Financial Advice Would Improve Equity Comp Outcomes

By revealing this gap between aspiration and action, Schwab's survey suggests that many stock plan participants would benefit both from better stock plan education, to reduce their fear of the unknown, and from seeking the assistance of financial advisors to help them navigate investment and tax details. About 80% of the respondents say they would be much more confident about their stock comp with the help of a financial advisor.

Many participants said they would like advice on:

  • tax consequences (50%)
  • retirement planning (44%)
  • the right timing for exercise/sale decisions (35%)

Advice

Stock Plan Education Resources

At myStockOptions.com, our extensive and engaging educational content on all aspects of equity compensation is licensed by stock plan providers and companies for their plan participants. The content includes not just easy-to-understand articles and FAQs but also videos, podcasts, modeling tools, and fun quizzes on many different topics (for example, try your hand at our quiz on RSUs). When they are ready, participants can seek an advisor with equity comp experience in our AdvisorFind directory.


Register For Our Financial-Planning Conference

We are preparing to hold our first-ever conference, a one-day event: Financial Planning for Public Company Executives & Directors (Monday, June 18, 2018). Taking place in the Boston area, this is a must-attend national conference for financial, tax, and legal advisors working with or wanting to counsel executives, directors, and high-net-worth employees. We have a wonderful group of expert speakers and a comprehensive agenda of sessions on various stock-related and financial-planning topics:

  • trends of importance to advisors
  • tax, estate, and SEC-related planning challenges
  • methods for attracting and advising high-net-worth clients
  • case studies and other examples of successful planning strategies

Continuing education offerings, including CFP® CE credits, will be available. Register at the conference website or contact us for more information (617-734-1979, [email protected]).