The myStockOptions Blog

’Tis The Season: Year-End Planning With Stock Options And Restricted Stock

The holiday displays may not be up this early (we hope), but it is once again time to think about year-end financial and tax planning. As part of your planning for the end of 2010 and the start of 2011, don't forget to review stock options, restricted stock, RSUs, and holdings of company shares. While financial goals, not tax rates, should really drive your investment decisions, you will want to review your tax position before the end of the year to make sure you aren't paying more taxes than necessary.

Evaluating your year-end tax situation will, however, be much harder than usual this year because a fog of uncertainty still clouds the post-2010 tax landscape. What the tax rates will ultimately be in 2011 will color your decision to accelerate or defer income at year-end. Unless you were already definitely planning to sell company stock or exercise stock options soon (e.g. because the options are close to expiration), many experts would tell you that the likelihood of higher tax rates ahead should not be the only reason for selling or exercising at the end of 2010.

We have updated all of the year-end content on myStockOptions.com, including the articles and FAQs in the section Year-End Planning. We will continue to update our content as details emerge about post-2010 tax rates and about the AMT income exemption amounts for 2010. Once the tax rates for 2011 have been established, you may want to consider various planning strategies for the end of 2010 (or the start of 2011). For example, if the top long-term capital gains rate grows from 15% to 20% in 2011, you may be tempted to sell appreciated stock before the end of 2010 to obtain the lower rate on the gain. However, you may be wary of the rule about wash sales. As we explain in our detailed FAQ on avoiding wash sales, the rule applies only to stock sold at a loss. This means you can sell the shares and quickly repurchase without wash sale problems as long as you sell the shares for a gain.

Many other helpful planning tips and ideas, for year-end or the coming tax-return season, are available in the award-winning content of myStockOptions.com.

Using Stock Comp To Help Grow IRA Savings

Our latest article series, in two parts, takes on one of the hottest topics in personal finance today: Strategic Planning With Roth IRAs And Stock Compensation by Sue Stevens, a noted wealth advisor and the former director of financial planning at Morningstar. Anyone can now convert a traditional IRA to a Roth IRA, and for a conversion in 2010 you can split the taxes due over 2011 and 2012 (50% each year). Part 1 explains the rules of converting traditional IRAs to Roths, discusses the role that stock compensation can play, and examines the related planning issues. Part 2 illustrates these points with a detailed case study. These articles superbly enhance our extensive content on the use of stock compensation in retirement planning.