Most tax planning has a deadline of December 31. After that, the year’s numbers are largely set. Here is what we review with tech clients each fall.
Equity compensation
- ISO exercises: work out how many shares you can exercise this year before AMT applies. Exercises after December 31 count toward next year. See ISOs and AMT.
- Disqualifying ISO sales: if you exercised ISOs earlier this year and the price has dropped, selling before year-end can remove the AMT adjustment.
- December vests: check how much tax was withheld on this year’s vests compared with what you will owe.
- ESPP holding periods: note which lots become qualifying if you wait.
Investments
- Tax-loss harvesting: selling investments at a loss can offset gains, plus up to $3,000 of ordinary income a year. Avoid buying the same or a substantially identical investment within 30 days before or after, or the loss is deferred as a wash sale. RSU vests and ESPP purchases can trigger wash sales too.
- Gains timing: consider whether to realize gains this year or next, based on your bracket in each.
Giving
- Donate appreciated shares held more than a year instead of cash. You can generally deduct the market value and never pay tax on the gain.
- Donor-advised funds let you take the deduction in a high-income year and decide which charities to support later.
Retirement and savings
- Make sure 401(k) contributions will reach this year’s limit by your last paycheck.
- Check whether your plan allows after-tax contributions and in-plan Roth conversions (often called a mega backdoor Roth).
- Fund an HSA if you have a qualifying high-deductible health plan.
Paying the tax
- Estimate the year’s total tax and compare it with what has been withheld and paid.
- Close the gap with extra withholding before year-end or a January 15 estimated payment. See estimated taxes for tech employees.
General information, not advice. Tax rules change and every situation is different. Book a call before acting on anything here.