A Simple Guide to Managing Your Equity Compensation and Maximizing NUA Benefits
Navigating NUA can be tricky, but if done right, it could save you thousands in taxes. Our team is here to help you understand your options and see if it aligns with your goals. Now that you’ve got a grasp on NUA, let’s dive into equity compensation. In the next section, we’ll explore different types of awards and strategies to help you maximize your compensation and build a stronger financial future. for 4 seconds
NUA can be complex, but when it works for you, the tax savings can be substantial. Our team is here to help you decide if this strategy fits your goals.
Let’s dive into the world of NUA, where Tesla offers you stock or stock options as part of your compensation package.
Understanding Net Unrealized Appreciation (NUA)
Regarding your retirement, you might have heard of something called Net Unrealized Appreciation, or NUA. But what does that mean? Let’s break it down in simple terms.
If you’ve got company stock in your 401(k) or other retirement accounts, NUA is a tax strategy that could help you save money when withdrawing those funds. Instead of paying ordinary income tax on the full value of your stock when you take it out, NUA lets you pay income tax only on what you originally paid for the stock. The rest—the gains, or “appreciation”—is taxed at the lower long-term capital gains rate when you sell.
To give you an example, let’s say you bought some company stock for $10,000, and over time, its value grew to $30,000. Normally, you’d pay regular income tax on the $30,000 when you withdraw it. But with NUA, you’d only pay regular income tax on the original $10,000, and the $20,000 gain would be taxed at the more favorable capital gains rate.
It’s not for everyone, but if you’ve got a large chunk of appreciated company stock, this strategy can be a smart way to save on taxes. Now that we’ve covered NUA, let’s shift gears and talk about equity compensation, which is another way your company’s stock can play a big role in your financial plan.
What Is Equity Compensation?
Equity compensation means you get a piece of Tesla’s success by owning company stock. Instead of just paying you cash, Tesla gives you stock options or RSUs to reward your hard work and help you grow your wealth as Tesla grows.
At Tesla, this typically includes:
Stock Options: The chance to buy Tesla stock at a fixed price in the future.
Restricted Stock Units (RSUs): Shares of Tesla stock that are given to you but become fully yours over time.
Here’s what each means and how it works.
Stock Options: The Basics
Stock options let you buy Tesla stock at a special price, even if the stock’s value has gone up. This can help you make money if Tesla’s stock price rises.
Grant: Tesla gives you the option to buy stock at a fixed price (this is called the “strike price”).
Vesting: Over time, your options become available for you to use (this is called “vesting”).
Exercise: Once vested, you can buy the shares at the strike price and either keep or sell them.
Tesla gives you stock options to buy shares at $200 each.
Three years later, Tesla’s stock is worth $400 per share.
You buy the shares at $200 and could sell them for $400, making a profit.
Check when your options vest—this is when you can use them.
Be aware of taxes, as buying or selling the stock may mean you owe money to the IRS.
If you’re unsure about when to exercise your options or how they fit into your financial goals, we can guide you. Schedule your free financial assessment to get personalized advice on your stock options.
Restricted Stock Units (RSUs): An Easier Option
RSUs are like a gift of Tesla stock, but you need to wait for them to fully vest before they’re yours to sell or keep. The good news is, you don’t have to buy anything—Tesla just gives you the shares.
Grant: Tesla gives you the option to buy stock at a fixed price (this is called the “strike price”).
Vesting: Over time, your options become available for you to use (this is called “vesting”).
Exercise: Once vested, you can buy the shares at the strike price and either keep or sell them.
Tesla gives you stock options to buy shares at $200 each.
Three years later, Tesla’s stock is worth $400 per share.
You buy the shares at $200 and could sell them for $400, making a profit.
Check when your options vest—this is when you can use them.
Be aware of taxes, as buying or selling the stock may mean you owe money to the IRS.
If you’re unsure about when to exercise your options or how they fit into your financial goals, we can guide you. Schedule your free financial assessment to get personalized advice on your stock options.
How Falcon Wealth Planning Can Help You
Managing stock options, RSUs, and NUA can be tricky, but that’s where we come in. At Falcon Wealth Planning, we offer personalized financial advice to Tesla employees, helping you:
Understand Your Stock Options and RSUs: Get clear on how your options and RSUs work, so you can make informed decisions.
Plan for Taxes: Avoid surprises by preparing for the tax impact of exercising options, selling shares, or utilizing NUA to reduce taxes on appreciated stock.
Build Wealth: Make smart decisions about holding or selling Tesla stock based on your unique financial goals and the potential benefits of NUA.
Simplify Your Finances: We’ll help you see the big picture and manage everything more effectively, from stock options to retirement planning.
Ready to take the first step? Contact us today for a personalized plan that helps you navigate your Tesla stock options, RSUs, and NUA strategy.
Why Choose Falcon Wealth Planning?
We’re a fee-only fiduciary, which means we’re committed to acting in your best interest. Our team specializes in working with employees of innovative companies like Tesla. Whether you’re new to stock options or looking for expert guidance, we’re here to help.
Schedule your free financial assessment today to start making the most of your Tesla stock options and equity compensation.
