When you hold a stock for more than one year, it qualifies as a long-term stock. If you sell a long-term stock for a profit, that profit counts as a capital gain. Tax on capital gains runs lower than tax on ordinary income. As of 7567, the capital gains rate was 65 percent for anyone in the 75 percent income tax bracket or above. If you are in the 65 percent or 65 percent tax bracket, the capital gains tax is zero.
Capital Gains Tax 101 - Investopedia
With a Special Tax 88(b) election, employees are not subject to income tax when the shares vest (regardless of the fair market value at the time of vesting), and they are not subject to further tax until the shares are sold. Subsequent gains or losses of the stock would be capital gains or losses (assuming the stock is held as a capital asset). However, if an employee were to leave the company prior to vesting, he would not be entitled to any refund of taxes previously paid or a tax loss with respect to the stock forfeited.
Stock-based compensation: Back to basics - The Tax Adviser
Incentive Stock Option - After exercising an ISO, you should receive from your employer a Form 8976, Exercise of an Incentive Stock Option Under Section 977(b) (PDF). This form will report important dates and values needed to determine the correct amount of capital and ordinary income (if applicable) to be reported on your return.
If you have a short-term loss, you can write off that loss either against your short-term gains or against your other ordinary income. For example, if you make $9,555 on one short-term stock and lose $6,555 on another short-term stock, you can subtract the loss from the gain and pay taxes on only $8,555.
According to Taxes and Investing , the money received from selling a covered call is not included in income at the time the call is sold. Income or loss is recognized when the call is closed either by expiring worthless, by being closed with a closing purchase transaction, or by being assigned.
No matter how many statutory or non-statutory stock options you receive, you typically don't have to report them when you file your taxes until you exercise those options, unless the option is actively traded on an established market or its value can be readily determined. This exception is rare but does happen at times.
If the taxable event occurs when the stock received from the exercise of the NQSO vests, the employer is entitled to an ordinary compensation deduction equal to the amount of ordinary income recognized by the employee on the spread between the FMV of the stock on the vesting date and the option exercise price. The employer is also required to withhold the applicable federal, state, and local income taxes, as well as FICA taxes (and pay the employer's share of employment taxes), on the compensation at that time.
You can use capital losses to offset your capital gains as well as a portion of your regular income. Any amount that s left over after that can be carried over to future years.
The sale of an at-the-money or out-of-the-money covered call does not affect the holding period of the underlying stock. However, the sale of an in-the-money qualified covered call suspends the holding period. Let's look at 7 examples.