136: Taxes on Stock Options

White Coat Investor Podcast

Dr. Jim Dahle of the White Coat Investor

Medicine, Health & Fitness, Business, Investing

4.9 • 2.3K Ratings

🗓️ 12 December 2019

⏱️ 41 minutes

🔗️ Recording | iTunes | RSS

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Summary

There are non-qualified stock options and incentive stock options. They are each taxed very differently. A listener joined a startup and was offered shares of stock in the company. If his company is acquired by a larger company he wanted to know who those stock options are taxed. Are all the taxes paid at the time of acquisition? Is it in the capital tax bracket? Is there a way to mitigate these taxes in any special way? In this episode we talk about the two different stock options and how they are taxed. You can see the full show notes and transcription here https://www.whitecoatinvestor.com/classic-blog/. It gets complicated. In non-qualified stock options you have to pay your full ordinary income tax rate on the difference between the two prices and pay payroll taxes. For the incentive stock option it depends on whether you are subject to the alternative minimum tax. Most doctors don't deal with stock options very often but if this situation applies to you, you will find the answers to how you are tax on those stocks in this episode.

For everyone else I still answer lots of listener and reader questions in this episode too. If you are considering medical school I discuss the choice of where to go to school. If you are trying to understand the mega backdoor Roth IRA better, we address that in this episode, as well as deferred compensation, paying tithing, and refinancing student loans in residency.

Sponsor
This podcast sponsored by Bob Bhayani at drdisabilityquotes.com. They are an independent provider of disability insurance planning solutions to the medical community in every state and a long-time white coat investor sponsor. They specialize in working with residents and fellows early in their careers to set up sound financial and insurance strategies. He is very responsive to me and to readers having any sort of an issue, so it is no surprise that I get great feedback about him from our readers and listeners. If you need to review your disability insurance coverage to make sure it meets your needs or if you just haven’t gotten around to getting this critical insurance in place, contact Bob at drdisabilityquotes.com today by email [email protected] or by calling (973) 771-9100. Just get it done!

Transcript

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0:00.0	This is the Whitecode Investor Podcast, where we help those who wear the Whitecode get a fair shake on Wall Street.
0:06.0	We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.
0:12.0	Here's your host, Dr. Jim Dolly.
0:18.0	This is Whitecode Investor Podcast No. 136, taxation of stock options and deferred compensation.
0:24.0	Wow, sounds really boring.
0:26.0	I assure you, this podcast is a lot more interesting than that title. Maybe that title will be good for the search engines to bring some people in to find it though.
0:33.0	This podcast is sponsored by Bob Bionny at drdisabilityquotes.com.
0:37.0	He's a truly independent provider of disability insurance planning solutions to the medical community nationwide in a long time WCI sponsor.
0:44.0	He specializes in working with residents and fellows earlier in their careers to set up sound financial and insurance strategies.
0:51.0	He's very responsive to me anytime readers have an issue and recently got this feedback by a reader.
0:56.0	Having had some pretty terrible financial salesmen come speak to my residency program, I'm trying to do better now that I curate our conference as a chief.
1:03.0	I wouldn't hesitate to recommend Bob to anyone and his place on your recommended page is well deserved.
1:08.0	So if you need to review your disability insurance coverage to make sure it meets your needs, or if you just haven't gotten around to getting this critical insurance in place, contact Bob at drdisabilityquotes.com.
1:19.0	Or by email info drdisabilityquotes.com or by calling 973-771-9100.
1:27.0	Our quote of the day today comes from Thomas Stanley, who you'll know from millionaire Dex Door claim.
1:34.0	He said high income producing but low net worth physicians have a propensity to acquire luxury items such as expensive prestige makes of motor vehicles.
1:43.0	But balance sheet affluent doctors drive Toyota's that makes me feel good because I got two Toyota's in the garage.
1:49.0	Thanks for what you do it's hard work. I had one of my partners come to me the other day and say man I'm feeling burned out he works 15 nights a month and I'm not surprised.
1:58.0	I just feel a little bit burnt out I was burned out working three or four nights a month and so you know I can really relate to somebody that doesn't want to work and stay up for half of the nights the rest of their career.
2:10.0	But that's kind of what you have to do if you don't put yourself in a financial position to do whatever you want to do.
2:16.0	And that is by not necessarily being completely financially independent but at least having your financial ducks in a row.
2:22.0	So I encourage you to do that it does make a difference in your clinical practice.
	...

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