Article

Executive tax matters.

Successful executives hold stock options and restricted stock, and participate in supplemental 401(k) and deferred compensation plans — each with different tax implications. Here is what to watch while you advise through tax season.

The flat federal supplemental withholding rate that applies to stock compensation is 22%, and 37% on amounts above $1 million. That often falls short of an executive’s actual marginal rate, which can create the need for an estimated tax payment. With the top rate currently at 37% and scheduled to return to 39.6% in 2026, timing decisions made now carry forward into the wealth plan.

Actionable insights

Understand Form 1040 reporting requirements

As you collaborate with an executive client’s CPA or analyze their return, know where stock compensation income and share sales land:

Stock compensation. Line 1 of Form 1040 if reported on Form W-2.
Stock options. Line 8j, for exercise income not otherwise reported on Form W-2.
Capital gain/(loss). Each sale is entered on Form 8949, totaled on Schedule D, and reported on Line 7 of Form 1040.
AMT. Calculated on Form 6251. The spread at ISO exercise is reported on Line 2i if the stock was not sold in the year of exercise; if it was sold, the difference from the ordinary tax is reported on Line 2k. Schedule 2 totals flow to Line 17 of Form 1040.

Explore SALT workarounds

At least 21 states have SALT workarounds, including California, Illinois, and New York. Note that these reduce state taxes on business income — not on wages, investment income, or property.

Evaluate whether to establish a donor advised fund

A DAF can be a tax-advantaged way for an executive to make an irrevocable commitment to charity with stock that has appreciated over time. Keep in mind that smaller charities may not have the resources to accept and manage donated shares directly.

Think ahead about taxes on non-qualified retirement plans

Many executives defer a portion of income into deferred compensation and supplemental 401(k) plans, which differ in how and when distributions are paid. For clients nearing or in retirement, review payout terms and the taxation that applies during retirement and upon disability or death.

Commit to planning year-round

Run income tax projections regularly so payment happens correctly through withholding or quarterly estimates — not as a surprise in April.

Educational content from advisingEquity. Not tax, legal, or investment advice.

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