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Will your exec comp be subject to expanded medicare taxes?

October 21, 2013

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Maybe. The following types of executive compensation could be subject to the health care act’s 0.9% additional Medicare tax:
•    Fair market value (FMV) of restricted stock once the stock is no longer subject to risk of forfeiture or it’s sold
•    FMV of restricted stock when it’s awarded if you make a Section 83(b) election
•    Bargain element of nonqualified stock options when exercised
•    Nonqualified deferred compensation once the services have been performed and there’s no longer a substantial risk of forfeiture
And the following types of gains will be included in net investment income and could trigger or increase exposure to the act’s new 3.8% Medicare contribution tax:
•    Gain on the sale of restricted stock if you’ve made the Sec. 83(b) election
•    Gain on the sale of stock from an incentive stock option exercise if you meet the holding requirements
We’d be happy to help you determine the best strategy for your exec comp. With smart timing, you may be able to reduce or avoid exposure to the expanded Medicare tax.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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