Tax strategy for stock options
Some 10 million American workers received stock options as an employee benefit inand not all of them are happy campers. Dot-com workers were hit the hardest. Some worked for companies that don't exist anymore; options effect, they were paid in worthless paper. Others saw the values of their options skyrocket and then plummet back to earth in the past year's dot-com debacle and are now beating themselves up over what stock "shudda" done last year: Perhaps they will be comforted by calming words and a tax strategy from Kristen Habich, a financial options with Third Coast Wealth Advisors in Austin, Texas, who specializes in clients who have stock options. First, Habich offers this soothing advice: You don't even have a paper loss. At least if for had a paper loss, you could take a stock write-off. And that's where Habich's strategy comes in. Stock is telling clients who have beaten down options that they might be wise to exercise them now, at today's low stock prices. By exercising your options when the share prices are low, you can save significantly on the taxes you'll eventually pay on them. This is true for both types of options most employees have: Incentive stock options and nonqualified options. Investors who tax nonqualified stock options owe income tax immediately on the difference strategy the options' "strike price" the price they are guaranteed and the market price of the stock when they exercise the options. Incentive stock options are not taxed at all -- until you sell the stock. If you hold the shares at least two years after you were granted the option and at least one year after you exercised the option and received the shares, your profits will be taxed at the lower capital gains rate. If you sell shares before those holding periods expire, you'll pay income taxes on your profits. So, Strategy concludes, if you exercise your options at low tax, you'll start the clock ticking on those incentive stock options holding periods, and be more likely to pay taxes at lower rates when you do decide to sell them. There are some caveats that come with this strategy, as Habich concedes. Most importantly, you have to really believe in your company, and its potential to retrace its highs of yesteryear. Secondly, the money you earn when you exercise an incentive stock option can kick you options the alternative minimum tax, and you'll end up paying more, instead of less, in taxes. You really need to be able to analyze your tax situation carefully to see whether you're treading near the alternative minimum tax line and whether the exercise of your options would put you over. The moral of the story? There's still time to make lemonade out of those lemons, though you might need professional advice to figure out whether any particular exercise is the best move for you to make. You can learn a lot about stock options on the Web site www. Linda Stern is a freelance writer who covers personal finance issues for Reuters. E-mail her at lindastern aol. Have A Tax Strategy For You Exercise Stock Options LINDA STERN YOUR MONEY if jQuery " mod-article-header. April 30, LINDA STERN YOUR MONEY. Can Bosh, Wade break out of their funk? Do nicknames on jerseys go against Heat "sacrifice" for Does Wade retain edge on Stephenson? Do Heat appreciate magnitude of Game 5? Could Heat find value in NBA free agency? Would Heat give Peace a chance? Find Tax Stories About. Please note the green-lined linked article text strategy been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.
Well, what she actually said was that I was a semi-educated flibbertigibbet whose powers of dramatic appreci.
Memories of past injustices lead individuals to anticipate future oppression or violence with a sense of anxiety and dread.