Still not how that works, if he wants cash he has to sell, selling stocks is heavily taxed. Now he can take a loan against the stocks but if they don’t do well then he’s not going to get much for them. It’s a risk and taxes is paid like it or not.
Still a shit system, but that’s a different discussion, but they pay taxes.
I wouldn’t say heavily taxed. If he exercised his options more than 6 months ago he’ll pay the flat 15% capital gains tax. Whereas his effective tax rate on his salary will be around 30%
I have read that that’s one of the wealthy’s “big secret” ways to avoid taxes. They allegedly live off of those loans as their spending money, while the value of the investments they use as collateral increases over time, but they don’t pay taxes on the Unrealized gains. And they can keep borrowing more as needed with those same investments as collateral.
I don’t have the whole scam figured out though. I’m not sure how they pay back the loans without having to cash out something that would generate a tax burden.
I’m assuming s long s they spread out payments over time and roll lots of the debt into the next loan.
That’s how they become too big to fail at their banks. At least that’s the Donald Trump method. His problem is that he has fuck all for collateral at this point.
Another thing to avoid taxes is donating stock to charities, as you can deduct the market value of the stock rather than just the cost basis.
Say you buy some stock for $100 and it goes up in value to $400. If you sell it, you have to pay capital gains tax on the $300 gain.
However, if you donate it, you don’t have to pay any tax and can deduct the whole $400, meaning your taxable income is reduced by $400 (which would be a ~$120 reduction in income tax for someone with a 30% effective tax rate).
Of course, you still end up with less money than you would have if you didn’t donate. But if you’re going to donate anyways, donating stock with gains is better than donating cash because you’ve already paid income tax on the cash but haven’t paid any tax on the stock gains.
It’s taxed as income when you receive it. If you hold onto it for over a year then sell it you pay capital gains (which are lower) on the difference between the grant price and current price (if it went up).
If they sell all of it that year. Which they don’t, even if they sell any at all the same year as issued. They stagger sales, and generally are doing it a year after, if they aren’t just taking a loan against the stock and using that.
It’s part of the compensation regardless of if you want to pretend otherwise. It’s income, it belongs in the total.
Still not how that works, if he wants cash he has to sell, selling stocks is heavily taxed. Now he can take a loan against the stocks but if they don’t do well then he’s not going to get much for them. It’s a risk and taxes is paid like it or not.
Still a shit system, but that’s a different discussion, but they pay taxes.
I wouldn’t say heavily taxed. If he exercised his options more than 6 months ago he’ll pay the flat 15% capital gains tax. Whereas his effective tax rate on his salary will be around 30%
Yeah and he can also use the stocks as collateral on a loan and avoid them all together.
I have read that that’s one of the wealthy’s “big secret” ways to avoid taxes. They allegedly live off of those loans as their spending money, while the value of the investments they use as collateral increases over time, but they don’t pay taxes on the Unrealized gains. And they can keep borrowing more as needed with those same investments as collateral.
I don’t have the whole scam figured out though. I’m not sure how they pay back the loans without having to cash out something that would generate a tax burden.
I’m assuming s long s they spread out payments over time and roll lots of the debt into the next loan.
That’s how they become too big to fail at their banks. At least that’s the Donald Trump method. His problem is that he has fuck all for collateral at this point.
lol just default the loan and let them take the collateral, you have thr money already tax free
Another thing to avoid taxes is donating stock to charities, as you can deduct the market value of the stock rather than just the cost basis.
Say you buy some stock for $100 and it goes up in value to $400. If you sell it, you have to pay capital gains tax on the $300 gain.
However, if you donate it, you don’t have to pay any tax and can deduct the whole $400, meaning your taxable income is reduced by $400 (which would be a ~$120 reduction in income tax for someone with a 30% effective tax rate).
Of course, you still end up with less money than you would have if you didn’t donate. But if you’re going to donate anyways, donating stock with gains is better than donating cash because you’ve already paid income tax on the cash but haven’t paid any tax on the stock gains.
I wonder if you can pay off loans by transferring the stock. Idk, just a thought
If he waits for longer than a year, short term under a year is taxed at normal income rates.
The interest rate on taking loans against assets is usually less than paying the taxes for selling the same assets
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It’s taxed as income when you receive it. If you hold onto it for over a year then sell it you pay capital gains (which are lower) on the difference between the grant price and current price (if it went up).
“They pay taxes” - right, and the effective rate is lower this way. That’s why executive compensation went this route decades ago.
Which is why, as I said, they all get paid this way.
If they sell after holding it for more than a year, if they short term sell the stock under a year it’s a normal income tax on said stock.
If they sell all of it that year. Which they don’t, even if they sell any at all the same year as issued. They stagger sales, and generally are doing it a year after, if they aren’t just taking a loan against the stock and using that.
It’s part of the compensation regardless of if you want to pretend otherwise. It’s income, it belongs in the total.
I’m not disagreeing with you, I think it’s a shit system as well, I’m just pointing out what a lot of people seem to think is 0 taxes on stocks.
They can take out loans with the stocks as collateral. The money received from loans isn’t taxable.
That still requires you to make sure the stock are worth something, and you have to pay interest on that loan.
I think people are thinking I’m defending the system, I’m not, I’m just pointing out how it works.