Just joined Snap (no vesting cliff). Given the options to select my equity tax elections: Federal: 22/30/37 percent California: 10.23/13.3 percent I understand the general idea that if you think the stock is going to appreciate you should elect to pay your taxes on the grant date, but how does this work with different rates, vesting schedules, ...etc? For example, if I have the compensation package below: Salary (annual): $100K RSU (over 3 yrs): $600K My annual TC is 100K + (600K/3) = 300K, which puts me in the 35% federal tax bracket. So if think the stock will appreciate do I elect the 37% and I then get the 2% back in tax return? Is this even how it works? Am I in the $300K tax bracket or am I in the 100+600=700K bracket because the election uses the "grant date"? So confused... #snap #tax
It doesn’t matter what the value of stock will be on the vest date. What matters is what income bracket you’ll be in when it vests. So for 300k, I would choose 30 for now and at the time of actual vesting, calculate your TC for the year and use some online calculator to check if you owe more, and if you do, make estimated tax payments to federal and state. ( check deadlines for each quarter)
Your income (what it says on your W-2) at the end of the year will be earned salary + total value of all stocks vested, calculated at vest time. It doesn’t matter when you pay the tax. So (as a simple example), if your salary is $100k, you work for 9 months, and you vest 100 shares in June at $50 each and 100 shares in dec at $100 each, your W-2 income for the year is $90k ($100k * 9m/1y + 50*100 + 100*100). (Of course, if the stocks appreciate after you vest and before you sell, you’ll need to pay capital gains on the difference as well.)
Hmm, I googled "equity tax election" and 83(b) [https://www.investopedia.com/terms/1/83b-election.asp] came up. Is this not the same thing? So our vesting date is when the RSU is released, which happens bi-weekly with our paycheck? And the grant date is our start date or offer date?
Grant date is start date (or shortly after), vesting date is when RSU is released but thats once a month on the 15th. You only pay taxes on vested stock.
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You won't pay your tax bracket over all your income, google a tax calculator. Also income is yearly, so 300k.