Equity compensation, also called stock-based compensation, refers to various non-cash remuneration received as part of a pay package.
Examples include stock options (ISO/NQSO), restricted stock units (RSUs), employee stock purchase plans (ESPPs) and more. The further along you get in your career, the more opportunities you have to be compensated in potentially lucrative and tax-efficient ways. You’ll need to understand the restrictions, the benefits, and the tax consequences. You’ll also need to think through your portfolio concentration and the risk of having both your income and investments tied to your employer.
Some questions to think about:
• Should you take advantage of an Employee Stock Purchase Plan
• Whether to sell or hold restricted stock/RSUs at vesting
• How to navigate market volatility
• How to reduce taxes and diversify
• Can you use the 83(b) election
• How to best use equity comp to save for retirement
With so many different types of equity compensation plans, it’s important to understand their differences so you can start on the right foot. Each plan’s details and restrictions vary, so it’s essential to take the time to read through the fine print. Equity compensation can be a great way to build retirement savings and create tax-advantaged sources of income.
But it gets complicated quickly, and you need to properly manage vesting schedules, make selling decisions, avoid over concentration risk, and be sure you have the funds available to pay the taxes.
We can help you figure out your best course of action.
*Collabria Capital, Inc. does not provide tax or legal advice. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. Please refer to our Disclosures.
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