[quote=ltsdd][quote=AN]So, if both spouses work, their combined income is $286k. They will be hit with this new tax…..So, yea, I still stand by my original point that the W-2 folks in the bay area will be most affected by this.[/quote]
Prop 30 will increase your tax if you make $250K or more or if you and your spouse rake in a combine $500K or more. Most engineers probably don’t have to lose sleep over the passing of this prop.
BTW., prop 30 increases income taxes for 7 years and sales tax for 4.
One interesting thing is that prop 30’s income tax portion hit roughly about 400,000 people in CA. That’s about 1% of the total population of about 37 million people.[/quote]
Um… bay area engineers will get hit by this….
Base salary+compensation from deferred stock plans….
Actually, there’s an interesting rub for anyone who has deferred comps…
See, the issue is the following. Certain compensation such as the more common restricted stock units have a very interesting tax consequence…
When your restricted stock grant vests, you are taxed the day you vest based on the fair market value of the stock price that day….That tax is based on ordinary income… If you hold on and sell at a later date, the difference between the FMV you sell and the FMV of your vest date is recognized as a capital loss/gain….
Someone who has a lot of stock grants vesting immediately pays income tax day of grant….BUT, if the person waits and holds and sells at a later date (even in the same year), and the shares go below the day of grant, the person can be severely limited in what sort of capital loss they can claim that year…. The implication is that the person ends up having to pay for a lot of tax on the stock as ordinary income that they really didn’t “earn” that year. (Because when they actually sold, it was less than the FMV of the shares on the day of grant….)…They might have a capital loss carryover to next year, but unless they actually have capital gain, it cannot be used to offset ordinary income)…And since there’s a bunch of new surcharges/taxes on top of people who have a on-paper ordinary income of $250k or more, it will affect people, even if your “net income” that year was much less because one decided to hold onto RSU stock longer.
Really fvcked up situation for people who aren’t careful..
