myStockOptions Provides Year-End Financial Planning Guidance

Political results and the Tax Cuts and Jobs Act could affect year-end planning decisions for those holding stock. notes that the end of the year is an important time for financial planning, even as the results of the 2020 presidential election present uncertainty about the future of tax laws that affect financial- and tax-planning strategies. Changes introduced in 2018 by the Tax Cuts and Jobs Act could also continue to affect year-end planning decisions.

To help, is providing education and guidance on major issues, choices and innovative financial-planning strategies for the end of this year and the start of 2021.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

This content is available in the website’s Year-End Planning section and through content licensing.

“The standard year-end planning strategy is to defer income into the next year and accelerate deductions into the current year,” says Bruce Brumberg, editor-in-chief of “But tax planning for year-end 2020 could change now that Joe Biden has won the presidency and Democrats may gain complete control of Congress. Biden’s tax plan calls for tax increases on high earners.”

That said, Brumberg notes that any changes depend on which party holds the majority in the U.S. Senate, which will not be decided until the run-off election for the two Georgia Senate seats, which will occur in early January.

“Even if Democrats do win Senate control, many experts say tax law changes are unlikely to be a focus of Biden’s first year,” Brumberg says. “Nevertheless, some financial advisers and estate planners are still expecting higher taxes at some point under the Biden administration and would factor those into multi-year planning.”

The firm says year-end financial planning is more important than ever for employees with equity compensation who are evaluating whether to exercise stock options; planning to sell shares acquired from restricted stock, restricted stock units (RSUs) or an employee stock purchase plan (ESPP); or donating stock to charities.

“You can control the timing of stock sales and option exercises, and you known when restricted stock/RSUs will vest,” Brumberg says. “Employees with equity grants, employee stock purchase plans and company shares should be aware of the 2020 and 2021 thresholds for higher tax rates on compensation income and capital gains, the additional Medicare tax on compensation income and the Medicare surtax on investment income. A big restricted stock/RSU vesting could push your income above the level that triggers the highest capital gains tax rate of 20% and/or the Medicare surtax of 3.8% on investment income. If your income in the next calendar year will be less than the level that triggers those higher rates, waiting until 2021 to sell stock could give you a capital gains tax rate of just 15% and no Medicare surtax.”

Brumberg goes on to say that tax rates should not be the only consideration: “Even if you predict that you will be in a lower tax bracket in the near future, many experts maintain that tax rates should never be the main reason for exercising options or selling shares, or waiting to do so, at the end of the year. Instead, make investment objectives and personal financial needs—not tax considerations—the driver of your decisions.”