NEW! What impact does the 2010 Tax Relief Act have on stock compensation and financial planning?
The Tax Relief Act of 2010, the result of a much-discussed compromise between President Obama and Congress, was enacted in late December. It extends the 2010 tax rates through 2012. Below are eight related planning points for equity compensation. Also included in this FAQ are the long-awaited AMT income exemption amounts for 2010 (and 2011), which were part of the tax bill. 1. The most meaningful new provision is the 2% cut in the Social Security tax rate, from 6.2% to 4.2% (Medicare remains uncapped at 1.45%). This reduces your Social Security tax maximum from $6,621.60 to $4,485.60, a savings of $2,136 ($4,272 for married couples). If you were not over the Social Security wage-base maximum ($106,800 in 2010, and the same in 2011), then delaying NQSO exercises until 2011 was a good decision. (This situation will reverse at year-end 2011, as the Social Security rate will return to 6.2% in 2012.) The rate cut in 2011 reduces your taxes by 2% on exercise income up to the yearly cap. It d
