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Navigating the world of equity exercises and sales can be complex, especially when considering the associated tax implications. As a well-versed CPA firm with a deep understanding of equity tax implications and executions, we recognize the importance of making well-informed decisions to minimize tax liabilities in these scenarios. In this article, we dive into effective strategies designed to help clients optimize their tax outcomes when dealing with equity exercises and sales, including incentive stock options (ISO), nonqualified stock options (NSO), restricted stock units (RSU), and employee stock purchase plans (ESPP).
Mastering Holding Periods for Capital Gains Optimization
A fundamental strategy for reducing taxes is understanding and strategically planning around holding periods. Holding assets for more than a year often qualifies for preferential long-term capital gains rates, which are typically lower than short-term rates.
Strategies for Incentive Stock Options (ISOs)
Strategies for Non-Qualified Stock Options (NSOs)
Strategies for Restricted Stock Units (RSUs)
Strategies for Employee Stock Purchase Plans (ESPPs)
Employing Section 83(b) Elections for Restricted Stock
Individuals who receive restricted stock grants should consider the Section 83(b) election. By electing to include the fair market value of the stock in their income upon grant, any future appreciation in the value of the property after the grant date is treated as capital gains rather than ordinary income when you eventually sell the property. This potential appreciation is taxed at a generally lower capital gains tax rate, which can result in significant tax savings compared to the higher ordinary income tax rates that would apply if you didn’t make the election. The 83(b) election can be a powerful strategy for individuals who anticipate that the value of their restricted stock or property will increase over time.
Contact Us Today
Equity exercises and sales, whether involving ISOs, NSOs, RSUs, or ESPPs, offer avenues for financial growth. Yet, the intricate tax landscape demands careful planning to minimize liabilities. Our well-versed CPAs stand ready to guide you through these complexities, offering strategies that align with your unique financial profiles. With a focus on holding periods, diverse equity types, and tax-efficient approaches, we are committed to helping you achieve optimal tax outcomes. Should you need assistance regarding your equity-related choices from a tax standpoint, please don’t hesitate to reach out to us using the contact information provided below.
Call us today at (833) 829-1120, email us at info@dimovtax.com, or fill out the form and we’ll get in touch immediately.
Dimov Tax is rated 5 stars on all major review platforms including Google, Yelp, Facebook, Angie’s List, Better Business Bureau, TaxBuzz, Thumbtack, Upwork, Bark, and much more.
Call us today at (866) 554-0148, email us at info@dimovtax.com, or fill out the form and we’ll get in touch immediately.
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