How Are Non-Qualified Stock Options (NSOs) Taxed?

Non-qualified stock options (NSOs) are a very popular way to compensate employees at publicly traded companies, and a wonderful benefit to receive. But the tax consequences, and how to handle them, can be confusing.

How you handle an NSO grant should depend on your personal financial situation: your objectives, your tax situation, your cash needs, the rest of your portfolio, etc. Managing your NSOs thoughtfully can lead to a huge tax savings over time. Managing them haphazardly can lead to an unwanted (and unneeded) bill to the IRS.

This post will cover how NSOs are taxed, and a few questions you should ask yourself before deciding how to handle them.

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Reviewing the Biden Tax Plan

With the election in November creeping closer, the campaign season is now in full swing. And the closer we get, the more details & campaign promises start to emerge from the candidates.

Biden’s tax plan has mostly flown under the radar in the national media thus far, thanks to the global pandemic. But given that he has at least a 50/50 shot at winning, I thought it made sense to devote a post to what he has in mind if he does win the Presidency. If elected, we could see some substantial changes to the tax code in the next few years.

Here’s the rundown.

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Don’t Take Those RMDs This Year!

As you may have heard, the CARES Act (aka the Coronavirus stimulus bill) created a holiday for mandatory distributions from retirement accounts in 2020.

So if you’re otherwise required to pull money from your IRA or 401(k) this year, you can skip it – penalty free. This includes retirement accounts of your own AND those inherited from someone else. Pretty neat, right?

But remember, the CARES Act wasn’t passed until March. What if you’ve already taken a distribution? Can you put it back?

The good news is yes, you can, as long as it’s done by August 31st. Whereas this wasn’t initially the allowable, updated guidance from the IRS says that those of you who took RMDs in January or February can now replace them.

Read on for the details on how to put back your RMD if you’ve already taken one, and when you might still want to take a distribution if you haven’t already.

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A Quick Summary of Coronavirus Related Tax Opportunities

It’s been quite a year so far. Wildfires in Australia, an impeachment trial of Donald Trump, the death of Kobe Bryant, and the Coronavirus pandemic. Oh yeah, and don’t forget that it’s an election year.

Given the roller-coaster year it’s not hard to miss some of the tax planning opportunities that have arisen from the Coronavirus and the resulting stimulus legislation.

To help make sure you don’t leave any planning opportunities on the table, this post will review the top Coronavirus related tax opportunities for individuals.

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More Updates to the Paycheck Protection Program: The PPP Flex Act

Another week, another round of updates to the Paycheck Protection Program. This week’s revision comes in the form of an entirely new (albeit brief) piece of legislation called the Paycheck Protection Program Flexibility Act of 2020.

The Act is mostly good news for business owners. This post covers what you need to know about the changes, and what the current opportunities are.

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How to Get Your PPP Loan Forgiven

We’re now about six weeks into the CARES Act and in round two of the Paycheck Protection Program. The $310 billion allotted to the program in round two is beginning to dwindle, but has lasted longer than most bankers expected.

There could be another round of stimulus that replenishes the program over the next few months, of course. There seems to be widespread effort in Washington to ensure that businesses that need PPP funds are able to get them. Who knows whether that will eventually happen.

For many of the businesses the most pressing question is no longer how they can access the program & obtain funds to keep their operations going. It’s what must I do to have this loan forgiven? This post will cover what we know so far.

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My Top 5 Year End Tax Planning Tips

Happy holidays!

It’s now December, and if you blink hard enough (or drink enough egg nog) you’ll wake up & find yourself in January of a new year. For many people, holiday office parties & Christmas shopping comes hand in hand with a few year end financial chores.

There are plenty of these financial “chores” you could occupy yourself with if you chose. But since December 31st coincides with the end of the tax year, today’s post will cover my 5 favorite year end tax planning tips. These are five of the most common year-end opportunities I see to reduce your long term tax liability.

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The Home Office Deduction 101: Simplified Method vs. Actual Expense Method

Even though we don’t currently prepare tax returns for clients at my financial planning firm, tax is a topic that comes up a lot. Many of our clients own businesses, and most of them share two opinions:

They really dislike paying taxes
They want to figure out how to pay less each year

Alongside that there are several tax related questions that come up fairly frequently with our clients. One of them is the home office deduction. How can you take it? Are you even eligible? What can do to take a larger home office deduction this year? What are your options?

Whereas employees and small business owners alike were eligible to take the deduction prior to 2018, the Tax Cut & Jobs Act eliminated home office expenses as a miscellaneous itemized deduction. That means that rather than deducting home office expenses on Schedule A as an itemized deduction, they’re now claimed on Schedule C. And since Schedule C only contains information related to self-employment, the tax law change essentially means that employees are no longer eligible to take the deduction.

For business owners still eligible to take the home office deduction, there are two options for calculating the amount: the simplified method and the actual expense method. This post will cover both in detail, and explain what you need to know to take the deduction yourself.

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A Tax Hater’s Guide to Investing: 5 Tax Free Investment Options Outside of the Roth IRA

Good investing includes minimizing taxes wherever possible. If you’ve followed me or the blog for long you’ve probably picked up on the fact that I’m a big fan of the Roth IRA for this exact reason. You pay income tax on the dollars you contribute to the account, but you never pay them afterward.

I’ve written about Roth IRAs quite a bit. Musings here on the blog have covered how to execute a back door Roth IRA conversion, a mega back door Roth IRA conversion, and when & how to convert your tax deferred savings during your retirement gap years.

Roth IRAs aren’t perfect though, and they’re not for everyone. So what other options are out there for investors trying to avoid taxes? This post will cover five.

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How to Evaluate a Real Estate Investment

The concept of acquiring rental properties as a means to build passive income has become exceptionally popular recently. In fact, it’s difficult to peruse the internet for content on personal finance without bumping into videos/podcasts/blogs/courses on how to build passive income through real estate investing.

My take on real estate investing is that it can indeed be a wonderful complement to your investment portfolio. But the conditions need to be just right. And given how quickly housing prices have risen since the depths of the financial crisis in 2009, the circumstances today are rarely compelling.

As you can imagine, this is a conversation I have with clients frequently. Some have an existing property we need to evaluate. Others fall in love with the idea of putting in sweat equity now & building an empire of properties that kick off income over time. This sounds nice in theory, but in my experience rarely pencils out. (At least of the opportunities I’ve seen recently in California & Oregon).

This post will explore how to evaluate real estate investing opportunities. We’ll cover cash flow, return on investment, and go through a real life scenario of a property I pulled from Zillow.com.

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