A Comparison of Employee Stock Options vs. Restricted Stock Units
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
1y ago
  It’s gratifying to be invited to participate in your company’s growth through an ownership stake in its future. But of course, not all offers are the same. Here’s a summary to compare the two most common kinds of equity compensation: employee stock options vs. Restricted Stock Units (RSUs).   Employee Stock Options Restricted Stock Units (RSUs) Overview As the name suggests, employee stock options give you the right, but not the requirement, to buy company stock at a fixed price, known as the strike price (or exercise price). There are two kinds of employee stock options: non ..read more
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Why Exercising Your Incentive Stock Options When the Price is Down May Not Be Your Best Option
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
1y ago
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? At a glance, it would seem qualified dispositions are the way to go: Qualified dispositions: Proceeds are taxed at (usually lower) long-term capital gains rates. Disqualified dispositions: Proceeds are subject to various (usually higher) ta ..read more
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Comparing Incentive Stock Options and Non Qualified Stock Options
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
1y ago
Has your employer offered you non-qualified stock options (NQSOs) or incentive stock options (ISOs) as part of an equity compensation package? If you’re lucky, maybe you even get to choose. That’s not typical; usually, an equity offering is what it is. But in case you’ve been wondering how each works, here’s a summary to help you compare NQSOs vs. ISOs. Comparing Non-Qualified Stock Options and Incentive Stock Options    Non-Qualified Stock Options (NQSOs) Incentive Stock Options (ISOs) Overview NQSOs are relatively easy to understand, with greater simplicity in how the bargain ..read more
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What Equity Compensation Shares Are the Best to Contribute to a Donor Advised Fund? Part 1
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
1y ago
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.  A tax deduction that can be especially beneficial in a high-income tax year, as may be the case when you have significant equity compensation activity. Plus, any long-term capital gains on the donated shares can magically disappear. If you’re charitably inclined to begin ..read more
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A Timeline of Events for Your Incentive Stock Options
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
2y ago
If you are lucky enough to be granted incentive stock options (“ISOs”) as part of your compensation package, it’s important to understand the timeline of events.  The timeline includes when your ISOs are granted, when they vest, when exercised, when the exercised ISO shares are sold, and when your ISO grant expires. All of these events can impact how and when you may be able to act on your incentive stock options and what these actions mean to you from a tax standpoint, a cash flow standpoint, and ultimately how much money ends up in your pocket. This article will discuss the general time ..read more
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How to Use Restricted Stock Units to Fund Financial Planning Goals
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
2y ago
Employees who receive restricted stock units (RSUs) as part of their compensation will have several things to consider. Tax implications, financial planning, what to do post vest, and managing any proceeds from a sale should all be approached with careful consideration to ensure you get the most out of your restricted stock units. If you plan to sell your restricted stock units when they vest, the after-tax proceeds from the sale may be used to help fund financial goals and supplement your income. This article will discuss when and how your RSUs are taxed, when you may want to sell your vested ..read more
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What is a Donor Advised Fund and Why You Might Want to Donate Low Basis Stock
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
2y ago
When it comes to charitable giving, there are many different options, from dropping a dollar in the collection plate at church to starting a private foundation. While an anonymous greenback in the offering plate might not generate the paperwork necessary to realize any tax benefits and starting a private foundation might seem daunting, a Donor-Advised Fund could be a great option for philanthropic investors. A donor-advised fund (DAF) can be particularly attractive in a year that you have significant equity compensation or employee stock option activity and your taxable income is higher than u ..read more
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What You Should Know About the Alternative Minimum Tax and Incentive Stock Options
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
2y ago
Most people understand that taxes can be a little more complicated when you have incentives stock options and other equity compensation. What they may not know is that income tax isn’t just about tax brackets to calculate your regular taxable income. The federal income tax system has a sister system that figures how much tax you may owe due to the Alternative Minimum Tax (AMT). AMT may kick in when your income goes over a certain threshold or when you engage in certain activities, namely exercising and holding incentive stock options. Alternative Minimum Tax can be a bit daunting, and it can c ..read more
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What You Should About the Alternative Minimum Tax and Incentive Stock Options
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
2y ago
Most people understand that taxes can be a little more complicated when you have incentives stock options and other equity compensation. What they may not know is that income tax isn’t just about tax brackets to calculate your regular taxable income. The federal income tax system has a sister system that figures how much tax you may owe due to the Alternative Minimum Tax (AMT). AMT may kick in when your income goes over a certain threshold or when you engage in certain activities, namely exercising and holding incentive stock options. Alternative Minimum Tax can be a bit daunting, and it can c ..read more
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6 Tips to Manage and Mitigate the Alternative Minimum Tax on Incentive Stock Options
Finance and Flip Flops
by Daniel Zajac, CFP®, AIF®, CLU®
2y ago
Incentive stock options are a type of equity compensation you may receive as part of your overall compensation package. Incentive stock options, or ISOs, allow you to buy company stock at a fixed price for a set period of time, regardless of the current fair market value of the stock. In the best circumstances, incentive stock options can be a tool to generate significant wealth if your ISOs have a low exercise price (the price you can purchase the stock via the option), the stock price is substantially higher than the exercise price, or both. Incentive stock options also come with tax advant ..read more
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