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Participant Viewpoint: Tax Strategies With Stock Options, Restricted Stock, And Deferred Compensation

Having both nonqualified stock options and nonqualified deferred compensation gives you a tremendous amount of flexibility to optimize your financial planning and tax situation. In this article, I explain how I have used the two plans in concert with one another.



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Key Points in This Article
In a year of option exercise or restricted stock vesting, deferring income into the NQDC plan can keep you out of the highest tax brackets.
Consider having a "big year" in which you exercise stock options and don't defer income. This will provide cash for spending needs during the subsequent "little year," which will include salary and bonus deferrals but no option exercise.
Upon option exercise or restricted stock vesting, consider deferring compensation to keep your income below the thresholds of the new higher tax rates.