Tech employees can make great money, but they also get hit with one of the worst taxes imaginable. It is not AMT, State income tax, or anything to do with Capital Gains.
We call it the 'Double Tax' on Stock Compensation. For new clients, this is one of our favorite wins to get right off the bat. We've amended too many tax returns that were hit by the 'Double Tax'.
Have you ever heard someone say this? “I feel like all of my money is going to taxes.” Well, in some cases they are right.
If you sell an asset at a loss, you might be entitled to either claim the loss as a deduction or use it to offset eligible gains. However, the wash sale rule sometimes comes into play, and it can be particularly pesky for those with multiple types of equity compensation from the same company (say, when you have those pre-IPO ISOs, there are RSUs vesting, and you also participate in the ESPP).
With California’s tax rate topping out at 13.3%, many residents are asking questions like this: How can I minimize my California tax hit when my company IPOs or I have a large windfall? Or this: If I leave California with all of my stock options, do I avoid paying California taxes?
Here is an extensive guide on the topic of California taxation of your equity.
When it comes to public companies, many employees have RSUs (company stock) as a piece of their compensation that vest either monthly, quarterly, or annually. The “by the book advice” is to sell the shares ASAP and deploy the funds elsewhere (diversify). We hear this all the time, but we’ve yet to meet someone that does exactly that.
