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October 22, 2015
 
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Hi There,

Your executive compensation could be subject to the 0.9% additional Medicare tax or the 3.8% net investment income tax (NIIT) when certain income exceeds the applicable threshold: $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for other taxpayers.

The following types of executive compensation could be subject to the 0.9% additional Medicare tax if your earned income exceeds the applicable threshold:

  • Fair market value (FMV) of restricted stock once the stock is no longer subject to risk of forfeiture or it’s sold
  • FMV of restricted stock when it’s awarded if you make a Section 83(b) election
  • Bargain element of nonqualified stock options when exercised
  • Nonqualified deferred compensation once the services have been performed and there’s no longer a substantial risk of forfeiture

And the following types of gains from executive compensation will be included in net investment income and could be subject to the 3.8% NIIT if your modified adjusted gross income (MAGI) exceeds the applicable threshold:

  • Gain on the sale of restricted stock if you’ve made the Sec. 83(b) election
  • Gain on the sale of stock from an incentive stock option exercise if you meet the holding requirements

Concerned about how your executive compensation will be taxed? Please contact us in Brea (714.990.1040) or Visalia (559.732.4135). We can help you assess the potential tax impact and implement strategies to reduce it.


  
 
 
 
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Online Tax Planning Guide

With many valuable tax provisions having expired Dec. 31, 2014 — not to mention continued uncertainty about tax reform — tax planning is more complicated yet more important than ever. To save the most, you need to not only take advantage of every tax break you’re entitled but also be prepared to act quickly if tax legislation is signed into law. This is exactly what our Tax Planning Guide is designed to help you do.

As you look through the guide, please note the strategies and tax law provisions that apply to your situation or that you would like to know more about. Then, call your Frazer LLP tax advisor with any questions you may have about these or other tax matters.

 


 
 

Frazer LLP | 135 S. State College Blvd., Brea, CA
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