Message Font: Serif | Sans-Serif
No. of Recommendations: 1
When the stock is granted it is considered income and when my broker sells and pays taxes the gains from the stock ceases to be earned income and is now capital gains. The money I earn from this stock cannot push me into a higher tax bracket even if it is sold prior to a year. Is this correct?


Not necessarily. The general rule is that the value of the stock is income to you (at ordinary income rates) when it is "substantially vested", which means when the restrictions lapse.

You MAY want to pay tax sooner rather than later by making a Section 83(b) election to include the value of the stock - or the bargain purchase element - in income now, and that makes the subsequent appreciation into capital gain. If you're paying for the stock, the income inclusion amount may be zero. But you still have to make the election. And the election is a separate document filed with the IRS, and is due 30 days after the receipt of the shares.

You should talk to an accountant. Chances are your HR dept. should have more details on this, too.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.