Reality Check: Tax Breaks on Stock Options | AccountingWEB

Reality Check: Tax Breaks on Stock Options

Current legislation swiftly moving through the House of Representatives could ensure that employees receive tax incentive breaks when they exercise their right to purchase stock from their employers.

Controversy exists, of course. Labor unions and Democrats have gone public in saying that the legislation needs to make certain employees don't abuse this privilege by replacing traditional retirement plans with stock buys.

Current rules state that employees have to pay taxes when they buy shares. The legislation, on the other hand, allows employees to defer any tax payments until the shares are sold. Depending on the situation, employees will pay taxes at long-term capital gain rates instead of higher income tax rates.

The proposal only calls for half of any company's employees to be eligible for the tax breaks; Democrats would like for at least 90 percent of employees to be eligible.

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