Financial advice- nonqual options

[HaleyB]

I know this is a Disney forum, but it is the only MB I ever use. I know I have seen people post here in the past that seem really well informed. Also links to sites that have good MB's about financial questions would also be nice.

Here goes.

We have a ton of nonqual options we need to exercise this year. An amount that almost doubles our income.

Why. We had a child in college for the past 5 years, add the year before he started and that is 6 years we did not exercise any options for fear of losing his financial aid package.

So my question is, is there any way to limit the tax impact?
We will make Max IRA contributions for each of us, I think that is $5,000 each. College savings accounts?

What else might we do? Anything?

I really don't mind paying taxes, I just hate to over pay.

 

[PatsMom]

Watch the limit on the IRA contributions. The option income will be included in your AGI so if you or your husband are covered by a retirement plan, you may not be eligible to fund a deductible IRA.

Funding college savings accounts may help with future taxes but will not shelter you from the income tax owed on the option exercise. Although if you have college funding still to take care of, the lump sum could be an excellent source of funds for this purpose. If you invest them in a regular non-qualified account, they will count against you in any financial aid calculations.

One option might be to use the funds to pay off your mortgage. Won't help you with the income and this year's financial aid application but you won't have a countable asset next year.