Now’s the time to begin your 2015 tax planning
Whether you filed your 2014 income tax return by the April 15 deadline or filed for an extension, you may think that it’s a good time to take a break from thinking about taxes. But doing so could be costly. Now is actually the time you should begin your 2015 tax planning — if you haven’t already.
A tremendous number of variables affect your overall tax liability for the year, and starting to look at these variables early in the year can give you more opportunities to reduce your 2015 tax bill. For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your liability.
In other words, tax planning shouldn’t be just a year-end activity. To get started on your 2015 planning, contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com. We can discuss what strategies you should be implementing now and throughout the year to minimize your tax liability.
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Got ISOs? You need to understand their tax treatment
Incentive stock options allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for.
ISOs must comply with many rules but receive tax-favored treatment:
- You owe no tax when ISOs are granted.
- You owe no regular income tax when you exercise ISOs.
- If you sell the stock after holding the shares at least one year from the exercise date and two years from the grant date, you pay tax on the sale at your long-term capital gains rate. You also may owe the 3.8% net investment income tax.
- If you sell the stock before long-term capital gains treatment applies, a “disqualifying disposition” occurs and any gain is taxed as compensation at ordinary-income rates.
There also might be alternative minimum tax consequences in certain situations. If you’ve received ISOs, contact the tax experts at Ciuni & Panichi, Inc. and Jim Komos at 216.831.7171 or jkomos@cp-advisors.com. We can help you determine when to exercise them and whether to immediately sell shares received from an exercise or to hold them.
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