What are the tax implications of equity compensation?

What are the tax implications of equity compensation?

Equity compensation can have various tax implications depending on the type of equity, such as stock options or restricted stock units (RSUs). Generally, you may owe taxes when you exercise options or when RSUs vest.

Are there different tax rates for long-term vs short-term capital gains?

Yes, long-term capital gains are typically taxed at a lower rate than short-term gains. Short-term gains are taxed as ordinary income.

How can I minimize my tax liability from equity compensation?

To minimize tax liability, consider strategies like holding onto your equity for over a year to benefit from long-term capital gains rates, or utilizing tax-advantaged accounts.

What happens if I sell my equity compensation too early?

If you sell your equity compensation too early, you may incur higher short-term capital gains taxes, which can significantly impact your overall tax liability.

Can I deduct any losses from my equity compensation?

Yes, you can deduct capital losses from your equity compensation against your capital gains, which can help reduce your taxable income.