How does equity compensation affect my tax return?

How does equity compensation affect my tax return?

Equity compensation can significantly impact your tax return. It typically includes stock options or restricted stock units (RSUs), which can be taxed as income when they vest or are exercised.

What types of equity compensation are there?

The main types include stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPPs). Each has different tax implications.

When should I report this income on my tax return?

You should report equity compensation income in the tax year it vests or is exercised. For stock options, this is usually when you exercise them.

Are there any deductions I can take related to equity compensation?

Yes, you may be able to deduct certain expenses related to the acquisition of the stock, but it depends on your specific situation. Consulting a tax professional is advisable.

What if I sell the stocks later?

If you sell the stocks later, you may incur capital gains tax on the profit. The rate depends on how long you've held the stocks.