Using Equity Tax Insights from Harness Wealth
Whether you’re making $50,000 or $5,000,000 of W-2 income, there are only so many actions you can take to dramatically change your tax burden. With company equity, the tax treatment of those profits can be radically different.
We built Equity Tax Insights to help startup employees better navigate these big choices. Our goal is to let you see what your equity could be worth (and what you could owe in taxes) based on various exercise/sell strategies. That way you can choose the best personalized strategy based on upcoming milestones and long-term goals.
Making a plan
Let’s use an illustrative client situation to show how equity tax insights make a difference. Take Oscar, for example. Oscar has ISO stock options in the late-stage startup where he works. His company has announced an IPO (great news) and Oscar has heard that effectively planning when to exercise his options may be a smart idea (it is).
Oscar has access to Carta through his employer and uses TurboTax to complete his tax filings. He knows equity can be taxed differently than income, but doesn’t know how to analyze his situation.
Oscar needs to know…
- How much will it cost to exercise my stock options (our Personal Balance Sheet can help with this)? Will buying and holding save me money?
- If I exercise, will that trigger AMT (Alternative Minimum Tax)?
- Does it matter where I live when the exit event occurs?
Understanding your options
Using Equity Tax Insights, Oscar can compare decision options and flex scenarios like future stock price, income, and locations. This gives him the ability to think through tradeoffs like…
- Minimizing Regular Taxes
- Minimizing Investment Risk
- Minimizing the Alternative Minimum Tax
And if Oscar is feeling like he needs help understanding those tradeoffs, he can supplement these tools with an Equity Tax Planning Session [→ Service Page]. It’s an easy way to speak with an expert without a big commitment. An Equity Tax Planning session is a one-hour consultation with a tax advisor who has expertise in equity compensation.
There also are integrated resources on the Harness Wealth platform to help with tax filing needs and financial planning and investment management once those situations become relevant. That level of flexibility is where the Harness Wealth platform becomes extremely valuable. You can get the right help at the right time for your ever-evolving financial situation.
