This news brief contains information to help financial advisors assist individuals with employee stock options and restricted shares by facilitating timely and prudent diversification decisions. ISO Planning Guidelines: If you have clients with Incentive Stock Options (ISOs) that have low Insight Ratios, be aware that it is prudent to exercise and hold them early in the year. This article explains the 5 rules-of-thumb regarding ISO/AMT planning. It also includes a summary of the Major AMT Changes Under the New Tax Law from myStockOptions.com. How to...
MoreIncentive Stock Option (ISO) Planning Guidelines
Although Incentive Stock Options (ISOs) are not as common as they were a decade ago, we still run into situations where financial advisors have a client or prospect that wants to take advantage of the lower Alternative Minimum Tax (AMT) tax rates on these grants and optimize for tax efficiency. These advisors turn to us for an easy way to do this. Unfortunately, there is no simple way to do an ISO/AMT tax analysis. Modeling the tax effects of ISOs...
MoreAMT Calculation: Major Changes Under New Tax Law
From the myStockOptions Blog While the American Taxpayer Relief Act (ATRA) did not end the alternative minimum tax (AMT), it has three provisions with a major impact on the AMT calculation. These are important for high-income taxpayers—particularly those who exercise incentive stock options. ATRA set the AMT income (AMTI) exemption amounts for 2012 at $50,600 for single filers and $78,750 for married joint filers. It also permanently indexed the AMT income exemption amounts for inflation in future years (this had never...
MoreEffects of the New Tax Law on Stock Compensation
by Bruce Brumberg from the myStockOptions.com Blog Among all of its provisions that took effect on January 1, the American Taxpayer Relief Act does not have any that directly relate to stock compensation—though, of course, increases in the rates on income tax, capital gains, and dividends indirectly affect the value of equity awards. The following changes in tax rates under the new legislation apply to income from stock option exercises, restricted stock and RSU vesting, ESPP purchases, sales of stock, and dividends....
MoreHow to Help Employees Better Value Stock Options as Compensation
by Susan P. Convery, Ph.D., CPA, CMA; Anne M. Farrell, Ph.D., CPA, CGMA; Susan D. Krische, Ph.D., CA; and Karen L. Sedatole, Ph.D. From the Journal of Financial Planning Executive Summary Employee stock options (ESOs) are often used to compensate employees other than top executives; however, ESOs are complex and not well understood by employees. In a study of 210 ESO recipients from five companies, we found employees often value their own options based on simple mental shortcuts, or anchors,...
MoreNon-Qualified Stock Options Are Much Better Than They Sound
by Dan Walter, Performensation Non-Qualified Stock Options (NQSOs, NQs, NSOs) should really be called Stock Options. Non-qualified (or non-statutory) makes them sound negative. The negative modifier simply refers to the fact that these stock options have no special section dedicated to them in the IRS tax code. Like Incentive Stock Options (ISOs), NQSOs are generally appreciation-only instruments. Unlike like ISOs, if the plan and local rules allow, they can be granted at price less than Fair Market Value (FMV). Although...
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