[cjoh]

I am more interested to know how much of that payout he will be taxed on

[gok]

Compensation like this is considered regular income, so as Tim is a California resident over half will be owed as tax immediately.

[webinvest]

If it’s mostly long term capital gains, he’s in the 20% LTCG tax bracket.

[bzbarsky]

23.8%, because he would surely have to pay NIIT as well, right?

But also, that's just federal taxes. California adds 13.3% on top of that (for any income over $1 million, which is most of the income here).

But also, this is a stock grant, which generally get taxed as ordinary income, so I would expect 37% federal, 2.35% medicare, 13.3% California tax, adding up to 52.65% in taxes.

[webinvest]

I’d bet money that Apple’s or Cook’s could afford an accountant that is smart enough to structure the deal so that it would be all long term capital gains instead of all ordinary income. Just say that he received the shares a year ago or when he started but those shares weren’t vested until now. Then it would be 23.8% federal instead of 37% federal… Although our government is broke and needs that extra tax revenue.

[bzbarsky]

The legal structures for RSUs are pretty clear, and they are counted as ordinary income when they vest.

The particular shares involved _could_ have used a different legal structure, but that's not my understanding based on the articles I've seen about this.

But even in your hypothetical it would not all be capital gains. It would be ordinary income for the value of the shares at the point of the grant, and capital gains for the appreciation since then.

[s1artibartfast]

I think medicare is capped after your first 140K of income, so it is a rounding error. Tax is still a huge cut.

[bzbarsky]

You're thinking social security. Medicare is very much not capped, and in fact you only hit the 2.35% rate after 200k individual or 250k family income; it's 1.45% before that (for the employee side).

[s1artibartfast]

You are correct, thanks