What are the tax deductions available for equity compensation?

What are the tax deductions available for equity compensation?

Equity compensation can include stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPPs). The tax deductions available depend on the type of equity compensation you receive.

Can you explain how stock options are taxed?

Sure! Stock options are typically taxed when you exercise them. The difference between the exercise price and the fair market value at the time of exercise is considered ordinary income and is subject to income tax.

What about restricted stock units (RSUs)? Are they taxed differently?

Yes, RSUs are taxed as ordinary income when they vest. The value of the shares at vesting is included in your taxable income.

Are there any deductions I can claim for these taxes?

You may be able to claim deductions for certain expenses related to your equity compensation, such as investment-related expenses or tax preparation fees, but it’s best to consult a tax professional for personalized advice.