Tax Tips

How Social Security benefits are taxed depends on your other income. In the worst case scenario, 85% of your benefits would be taxed. (This doesn’t mean you pay 85% of your benefits back to the government in taxes—merely that you would include 85% of them in your income subject to your regular tax rates.) To determine how much of your benefits are taxed, you must first determine your other income, including, for this purpose, tax-exempt interest. Add to that the income of your spouse, if you file jointly. To this add half of the Social Security benefits you and your

This month’s Tax Tip expands on last month’s Stock Option discussion to address Incentive stock options (ISO) in more detail. For the purposes of this discussion, let’s assume the ISO gives you the right to buy 1,000 shares of the company’s stock at its fair market value at the time of the ISO’s grant (expected to be about $100 per share) for a five-year period following the grant. The grant of the ISO to you will not be taxable. Nor will your later exercise of the ISO (except that it may make you subject to the alternative minimum tax, see

More and more employers are granting stock options to employees as part of their compensation packages. From the tax standpoint, there are two kinds of options—statutory and nonstatutory. “Incentive Stock Options,” or ISOs, as they are commonly known, are statutory options, because they are specifically provided for in the Internal Revenue Code and are subject to numerous qualification requirements. Options that don’t meet these requirements are nonstatutory options, also known as nonqualified options. Both kinds of options have tax advantages, but there are quite a few differences between them. Here’s some basic information on the taxation of compensatory stock options