Year-end is always a key time for financial and tax planning with employee equity compensation and company stock. The results of the 2024 US election—Donald Trump’s second presidency and a Republican majority in Congress—have added some clarity on taxes but have also introduced areas of uncertainty. The longer-term outlook for the tax laws and the stock market remain key factors in year-end planning for employee stock options, restricted stock units (RSUs), employee stock purchase plans (ESPPs), and related holdings of company shares.
Tax-Planning Outlook
The Republican-driven Tax Cuts & Jobs Act (TCJA) will expire after 2025 unless it is extended or made permanent. Before the election, when the White House and Congress were considered a tossup, the tax landscape after 2025 was anyone’s guess. Wildly different outcomes were possible, from tax hikes to tax cuts. The Republican sweep of the White House and Congress has removed at least some of that uncertainty.
“The extension of the Tax Cuts & Jobs Act beyond 2025 seems to be locked in,” believes John Barringer, Managing Partner of Executive Wealth Planning in Denver. He was one of three experienced financial advisors who spoke during a recent myStockOptions.com webinar on year-end planning that I moderated.
While it is tempting to think that the incoming Republican White House and Congress will not just extend the TCJA but actually make it permanent, all three of the webinar’s advisor panelists expressed doubt about that extreme. Even the webinar audience of advisors seemed to agree. In a poll conducted live during the webinar, about 70% of the attendees indicated that they believe the TCJA will be extended but not made permanent.
Nevertheless, the advisors who spoke during the webinar are confident enough about an extension to reallocate their planning focus to other areas. “A lot of our planning was built around the TCJA expiring,” said webinar panelist John Owens, Managing Partner of Brooklyn FI in New York. “In light of the election, multiyear planning at year-end has shifted. We may have a broader timeframe to think about how we space out ordinary income. It means that state taxes actually matter more, now that federal tax rates will stay similar to what they are.”
Content retrieved from: https://www.forbes.com/sites/brucebrumberg/2024/12/03/post-election-financial-planning-for-stock-options-rsus-and-espps/.
