[askafriend]

You forget that many of these compensation numbers include a large portion of equity that many people hold for 1yr to get long term capital gains tax of just 15%.

Many of these equity packages include components that can top 6 figures a year. $100k in equity every year for 4 years is not an unreasonable equity package for a mid-senior engineers (5+yrs exp).

[kajecounterhack]

> You forget that many of these compensation numbers include a large portion of equity that many people hold for 1yr to get long term capital gains tax of just 15%.

Actually for RSUs you are taxed at vest, so it's your pay tax rate (probably in the realm of 35%+). What's taxed at 15% after a year is any additional gain from vest time. So if you get 4 google stock at $1000 a piece, they sell 2 to cover your tax liability, refund you the difference between $2000 and .35*4000, and you get 2 stocks you've just paid full taxes on. If in a year they're worth $1200 a piece, you can pay additional taxes of only 15% on the $400 you just made by holding onto them.

[C1sc0cat]

That's brutal is the not any CGT allowance? Looks like we are getting an EMI option scheme her in the Uk and the EU.

This is the one where employees do not have to pay the income tax that would normally be charged on the market value of any shares or options granted to them.

If employees are given options under an approved EMI, they are only charged capital gains tax at 10% on the increase in value over what they pay for the shares (the option's 'exercise price'), so long as that price is at or above the market valuation of the shares on the date of granting the options.

[joshuamorton]

Options and rsus are different. I don't buy my rsus, the company just gives them to me, so I pay tax on any shares they give me, because they're income.

If I purchased them as options, different things would apply. But I'm happy paying tax on income of it means I get the shares for free.

The change in price if the shares is taxed as capital gains though.

[askafriend]

You’re right, thanks for jumping in and clarifying my hastily written comment!

Stock gain does account for a significant portion of comp the past couple of years though so it’s not a small thing.

Options (vs RSUs) also have slightly different mechanics.

[thedufer]

But the stock gain that accounts for a significant portion of comp is between grant and vest, and thus is still taxed at normal income tax rates.

Gains after vest can't really be counted as comp, since anyone else could have bought those same shares and made those same gains. That's just investment income; attributing it to your employer/employee relationship is silly.