Quote:
Originally Posted by Holladay
My wife has an stock option in her new company for a "Qualified" 423 component and or a NON- 423 option.
What are the differences? Taxation?
In my mind, qualified is like a 401k corporate plan that is pre-tax vs a Roth, post tax.
Or is it options as to when she can sell the options?
I have done some research, and can't figure it out in simple terms.
The CP Brain Trust will provide a clear answer.
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It's an employee stock purchase plan. You can choose to have part of your pay to purchase stock at a discount from the market with no immediate tax consequence. You are subject to short term or long term capital gains when you sell it, and your cost basis is the discounted price. My old company I could buy stock at a 15% discount each quarter. They would withhold money form my check and then purchase the stock. For example, if the stock closed at $100 on 12-31. My accumulated amount that had been deducted from my pay on a bi-weekly basis or a one time basis (i was able to choose several options) would purchase the stock at $85. You could then turn and sell it pretty quickly for current market value, but then it would be considered short term cap gains, or basically ordinary income. If you held it longer than a year, it was consider long term cap gains and was taxed at the federal rate of 22.5%. (20% cap gains and 2.5% obomacare tax). We were limited to $25k a year and I maxed out as the company was a fortune 500 and had a record of decent growth and paid a great dividend, which I reinvested back into the stock. Hope that helps.