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Not until you cash them out. Restricted stock, that is. I mean, you report dividends as regular income, but those aren't usually a huge chunk of income, even if you do get a good bit of stock because it's not all vested yet.
I know because part of my household's income (though I would not class us as "rich") comes from stock.
So, if you get paid 200k in salary and 1.5 mil in stock, you will pay less taxes yearly and you take the hit over time, as each award vests (because that stock is not handed out all at one time every year). So, it's not permanent avoidance, just temporary. But, it is still avoidance.
Most people who get RSUs don't get mostly RSUs and a small income. Typically, that's a C-band type of deal.
Most get a higher salary and a smaller percentage (30% or less) in RSUs.
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I personally want to move from income and property tax to a VAT/sales tax on all purchases. To me this makes the most sense. We shouldn't be taxing people on their income but on what they purchase.
As capital gains if you hold them over a year. The max you can be taxed is at 20%.
Now municipal bonds are not taxed at all.
Ayup. And it beats that 33% or so tax bracket most people with stock would be paying tax at (plus the AMT chunk on top of that) if they took that stock income as straight salary instead of stock.
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For many, unfair is, "I don't know what those people with more than me pay in taxes, but it's not enough."
I only think it's unfair that there are so many tax loopholes for people whose income is from a source other than wages.
It's almost like people are paid not to work. Or, to work very little. This is true no matter which end of the system you are on.
Also, I have a loathing of the AMT. It was supposed to prevent the very wealthy from paying too little tax or avoiding tax (kind of how they manage to now), but it hits the upper-middle class to somewhat wealthy (in terms of average US wages, anyway) way harder than it ever does an actually wealthy person.
Because Congress sees what a huge money pot they have now that wages have increased for a good chunk of the citizenry and they don't want to lose that revenue stream even if it is unfair.
I know people who avoided marriage to avoid the AMT. I mean, they did not plan on having kids, so why get married and pay more taxes when you can stay single and pay less?
I know that marriage increased the tax burden for me and my husband because of our joint incomes. By a good amount, really.
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The capitol gains tax of 20% only applies to the profit (if any) derived from the stock.
Say I get given (earn) 50K stocks that are valued at $10 a stock ($500K). I have to give 1/2 that to the government (~$250,000) in the form of income tax, when I receive those stocks.
Now if I keep those stocks (well, what's left after "giving" 1/2 of them away to the government), and they go up by $2 in a year, and then I sell them, I have to pay capital gains on that profit, just like everyone else with stocks. If I sell them in under a year then I pay my normal tax rate on the $2 per share profit.
Private corporations offer their own stock, not municipal bonds!!?? What does that even have to do with the subject at hand?
You're referring to selling of stock.
And, every corporation knows what people have to give up as "income" when they hand out stock and they dole it out accordingly.
It is most definitely done as a way to avoid regular income taxes.
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I personally want to move from income and property tax to a VAT/sales tax on all purchases. To me this makes the most sense. We shouldn't be taxing people on their income but on what they purchase.
I would only agree to that if we didn't tax necessities like food and personal items like diapers and so forth.
To tax that stuff and have this tax be the government's only revenue stream would disproportionately affect the poor.
If Bob makes 1000 dollars a month and Steve makes 10000 a month, is Steve REALLY going to spend the same percentage of his income on groceries as Bob does to feed his family?
Nope.
__________________
When in doubt, check it out: FAQ
I only think it's unfair that there are so many tax loopholes for people whose income is from a source other than wages.
It's almost like people are paid not to work. Or, to work very little. This is true no matter which end of the system you are on.
Also, I have a loathing of the AMT. It was supposed to prevent the very wealthy from paying too little tax or avoiding tax (kind of how they manage to now), but it hits the upper-middle class to somewhat wealthy (in terms of average US wages, anyway) way harder than it ever does an actually wealthy person.
Because Congress sees what a huge money pot they have now that wages have increased for a good chunk of the citizenry and they don't want to lose that revenue stream even if it is unfair.
I know people who avoided marriage to avoid the AMT. I mean, they did not plan on having kids, so why get married and pay more taxes when you can stay single and pay less?
I know that marriage increased the tax burden for me and my husband because of our joint incomes. By a good amount, really.
The vast majority of those loopholes were put in place as a way for the government to steer economic activity.
It's one of the reasons why I want government restricted to doing their job and not trying to control everything they can.
I would only agree to that if we didn't tax necessities like food and personal items like diapers and so forth.
To tax that stuff and have this tax be the government's only revenue stream would disproportionately affect the poor.
If Bob makes 1000 dollars a month and Steve makes 10000 a month, is Steve REALLY going to spend the same percentage of his income on groceries as Bob does to feed his family?
Nope.
VAT = Value Added Tax meaning it's only a tax on non-necessary items. Food would be exempted unless it's "junk food" or alcohol.
I would only agree to that if we didn't tax necessities like food and personal items like diapers and so forth.
To tax that stuff and have this tax be the government's only revenue stream would disproportionately affect the poor.
If Bob makes 1000 dollars a month and Steve makes 10000 a month, is Steve REALLY going to spend the same percentage of his income on groceries as Bob does to feed his family?
Nope.
Most plans like the FAIR tax give prebates that cancel out the taxes for basic necessities.
Not until you cash them out. Restricted stock, that is. I mean, you report dividends as regular income, but those aren't usually a huge chunk of income, even if you do get a good bit of stock because it's not all vested yet.
I know because part of my household's income (though I would not class us as "rich") comes from stock.
So, if you get paid 200k in salary and 1.5 mil in stock, you will pay less taxes yearly and you take the hit over time, as each award vests (because that stock is not handed out all at one time every year). So, it's not permanent avoidance, just temporary. But, it is still avoidance.
Most people who get RSUs don't get mostly RSUs and a small income. Typically, that's a C-band type of deal.
Most get a higher salary and a smaller percentage (30% or less) in RSUs.
So in other words, you're changing your story, and you agree with me.
Any stocks you receive as an employee will be taxed at your normal tax rate. There is no avoidance.
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