All Things Equity Compensation and Employee Stock Options
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Employee stock options (ISO and NSO) and restricted stock units can be confusing and complex. We have years of experience simplifying these concepts, empowering our clients to make informed and educated decisions regarding investment risk, tax planning, and financial goals.
Tax planning is a critical part of your financial plan. We have the resources and experience to evaluate and identify tax planning opportunities, especially as it relates to equity compensation, helping to optimize the value of your assets.
In depth, digestible articles that help you make sense of your incentive stock options, non qualified stock options, restricted stock, other equity compensation, and more
Employee stock options and restricted stock units are collectively discussed under the umbrella of equity compensation. As equity compensation, they have some similarities. Yet they also have a lot of differences. It is these differences that are reviewed and highlighted in this article.
Non-qualified stock options and incentive stock options are the two types of employee stock options that you may receive as part of your compensation package. While they have some similarities, they also differ, particularly when speaking to how they may be taxed at exercise and upon the final sale of stock.
Wouldn’t it be great if your company stock price only ever went up—especially if you’re participating in its growth through incentive stock options (ISOs)? Unfortunately, that’s not always how the world turns. If the share price goes down instead, you may be bummed to see the value of your incentive stock options is less than what it once was. However, a down stock price might mean that you could score some tax breaks if you exercise and hold some of those ISOs. When the price is down, the move might help minimize alternative minimum tax (AMT).
To achieve this win-win ideal, it’s important to be deliberate about which equity compensation share lots you donate, as well as whether you donate them as post-sale cash proceeds, or unsold shares. We concluded that cash isn’t necessarily king when donating to a DAF. Directly donating low basis, long-term shares usually reigns supreme.
If there’s such a thing as a match made in philanthropic heaven, it may be the ability to donate a portion of your equity compensation shares to a Donor Advised Fund (DAF). DAFs are relatively easy to fund, easy to manage, and they ensure that you get a tax deduction for the full, appreciated value of your donated stock.
Who doesn’t love a great tax break? You and I can’t personally reverse a bear market or revise Federal regulations. But we do get to decide when and how to exercise, hold, and sell our incentive stock options (ISOs), dictating whether we have a qualified disposition or disqualified disposition. Why not make best use of your tax-planning powers when you do?
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