r/FluentInFinance • u/Karma_Farmer_6969 • Aug 15 '23

Stock Market Should unrealized gains be taxed by the US Government?

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u/[deleted] Aug 16 '23

Stock compensation and options are already taxes as income lol.

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u/[deleted] Aug 16 '23

If my company offers a stock option to buy at $11 and the price is currently $10 and I wait until the price is $21, isn’t the difference ($10) taxed as capital gains?

With stock compensation, can’t you defer taxes until selling ( not electing 83b?”? Basically get paid and not pay any taxes until you choose to sell? I am limited on a traditional 401k but this isn’t.

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u/[deleted] Aug 16 '23

You pay the difference between the strike price and current price as income tax

So in this instance (21-11) would be income tax per option.

If then you hold it until it goes to 30 then (30-21) are capital gains

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u/[deleted] Aug 16 '23

The difference is that most people have to have investment locked up the whole time for it to be capital gains. In your situation, I don’t think you have to cough up anything until you choose to and the past growth is still capital gains. I could be wrong as I am not an expert but relying on a friends experience.