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Employee Stock Purchase Plan 04.21.2021

Employee Stock Purchase Plan | If you are an employee of a publicly traded company, it most likely offers an #employeestockpurchaseplan, or #ESPP for short. These are excellent plans to take advantage of as they allow employees to purchase company stock at a #discount. However, what most people do not fully understand are the #tax consequences of selling the stock.

With an ESPP, you are not taxed at the time the shares are purchased, but instead only when you sell. As you may expect, the tax consequences of the sale will be different, depending specifically on how long you have held the shares. This holding period will determine if the sale is a #qualifyingdisposition or #disqualifyingdisposition.

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn the taxation rules associated with ESPP plans, and the importance of having a “disposition strategy” that will produce the best economic result for you.

Sacramento Certified Public Account, Matt Regan | Sacramento Wealth Advisor | Sacramento Financial Advisor

If you are an employee of a publicly traded company, it most likely offers an employee stock purchase plan, or ESPP for short. These usually are excellent plans to take advantage of, oftentimes allowing employees to use after-tax payroll deductions to purchase company stock at a discount, which can be as high as 15% off the actual market price of the stock! However, what most people do not fully understand are the tax consequences of selling the stock acquired through these plans. 

Hi Everyone, Matt Regan here from Towerpoint Wealth and today I am going to discuss the taxation rules associated with ESPP plans, understanding the importance of having a “disposition strategy” that will produce the best economic result for you.

With an ESPP, also known as a qualified Section 423 plan, you are not taxed at the time the shares are purchased, but instead only when you sell. Employees can generally sell shares at any time, which is great if you have immediate cash needs, or want to reinvest the money into other assets. However, the tax consequences of the sale will be different, depending specifically on how long you have held the shares. This holding period will determine if the sale is a “qualifying disposition” or “disqualifying disposition,” which governs how much of the gain will be taxed at capital gains rates, or at less favorable ordinary income rates. 

A qualifying disposition occurs when you sell your shares after holding them for at least one year from the purchase date, *and* at least two years from the offering date. The rules say that you will pay ordinary income tax on the lesser of either 1) The discount offered based on the offering date price, or 2) the gain between the actual purchase price and the final sale price. The remainder of the gain, if there is one, will be taxed at the more favorable long-term capital gains rate. 

If you don’t meet the holding period requirements for a qualifying disposition, then by default you end up with a disqualifying disposition. You will pay “regular” ordinary income tax on the difference between the actual purchase price and the purchase date market price, and you’ll pay capital gain tax rates on the difference between the purchase date price and the final sales price.

A little complicated, I know. As you can see, it is incredibly important you understand the ESPP tax rules and how they can impact the amount of money you end up keeping in your pocket, if and when you decide to sell any shares you own in your plan. Feel free to contact me on LinkedIn, Facebook, or Instagram to discuss a disposition strategy that is best for you given your circumstances and financial goals. Thanks, and have a great day.

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Home Office Deduction 04.02.21

Like many workers during the pandemic, you went from a somewhat quiet office to your tiny home “office” where you couldn’t escape your noisy kids and barking dog. With Tax Day pushed back to May 17th, this has given taxpayers extra time to find ways to lower their tax bills. Like most, you may have thought to yourself, “Wait a minute, I worked out of my home office for 9 months last year. Can I claim the home office deduction?”

As you would expect, taxpayers must meet very specific requirements to claim home expenses as an income tax deduction. You must be a certain type of taxpayer, you must determine if the office is really your principal place of business, and only certain expenses qualify for the deduction.

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn whether or not you qualify for the home office deduction, and if you do, how to calculate the deduction. 

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Rental Passive Activity Losses

Do you invest in #rentalrealestate? Are you considering doing so? You have heard about the potential #taxdeductions and benefits, right? Not so fast!

Watch this quick video from our Wealth Advisor, Matt Regan, to learn more about the passive activity loss (PAL) rules associated with owning rental real estate, and message us with any questions that are on your mind.

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Choosing Who Will Inherit Your Retirement Accounts

You are working on your estate plan, and trying to figure out who you should name as the beneficiary of your 401k account and IRAs. Simple – the kids, right? Not so fast.

Click to watch the video below from our Wealth Advisor, Matt Regan, to learn the non-spouse beneficiary distribution rules for inherited and pre-tax IRAs and “regular” pre-tax 401ks, and why understanding these rules are so important for income tax and estate planning purposes.

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Cryptocurrency – Wait, I Have to Pay Taxes??!!

Do you own/trade cryptocurrency? Interested in investing in BitcoinEthereum, or any of the other 4,000 cryptocurrencies currently available to own and trade?

If so, it is important you understand the income tax consequences of owning crypto.

If you are thinking about buying, selling, or trading cryptocurrencies, watch this quick video from our Wealth Advisor, Matt Regan, to learn the tax consequences of doing so.


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Rich vs Wealthy

Would you rather be rich or wealthy? Do you know the difference? The small financial decisions we make today will have a huge impact on our future. Click below and take 60 seconds to watch Matt Regan’s video message, and click HERE to congratulate him on his new baby boy!

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Estate Planning

Planning for your death and the death of your spouse – not very pleasant to think about, but clearly very important when it comes to proper estate planning.

Click below and take 60 seconds to watch Matt Regan’s most recent One Minute Tax Tip, as he expands on the importance of making the disposition of your assets as easy, streamlined, and tax efficient as possible for the people we care about and ultimately will leave behind.



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Coffee At Home

Investing early and making intelligent incremental monetary decisions usually leads to BIG THINGS, it just takes time and discipline.

Click below and take 60 seconds to watch Matt Regan, CPA, MBT – Wealth Advisor‘s most recent OneMinuteTaxTip video to learn how a simple change in your financial lifestyle, such as making coffee at home, can end up having a huge impact on your longer-term networth and your ability to #retire when you want to!

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Retirement Account Rollovers | One Minute Tax Tips

This week’s One Minute Tax Tip – old 401(k) and retirement account rollovers! Many people have a retirement account held with a previous employer, but oftentimes don’t know what to do with these assets. Watch this quick video to learn more about the four options available to you.

Feel free to email us at info@towerpointwealth.com to discuss your circumstances further.

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“Encouragement” – Your 2021 Financial Goals | One Minute Tax Tips

Instead of a “regular” One Minute Tax Tip, this week our Wealth Advisor, Matt Regan, brings you encouragement. Encouragement to reflect not only on your 2020 financial accomplishments, but also on your 2021 goals.

Feel free to email us at info@towerpointwealth.com to discuss your circumstances further.