2013 Tax Rates and Equity Compensation

Uncertainty about the state of the tax code in 2013 is creating some difficult decisions for companies and individuals with stock plans. Unless Congress extends current tax rates, due to expire at the end of 2012, the amount of tax due will change on the exercise of options, vesting of restricted stock or RSUs, or the purchase of shares under a stock purchase plans. Changes would likely affect the capital gains rate, the rate on dividends, and Social Security and Medicare tax, as well as withholding rates. As MyStockOptions.com notes, however, "Unless you were already definitely planning to sell company stock or exercise options soon, many experts would say that the likelihood of higher tax rates ahead should not be the sole reason for taking these actions before the end of 2012."