After seeing the details of Biden’s big tax increase proposal and reading that there is a legitimate chance that Democrats will win the White House and both houses of Congress this November, I figured it would be a good time to accelerate some MegaCorp stock option sales that I could otherwise stretch out to July 2022.
I made my big stock move of the decade back on St. Patrick’s Day during the pandemic meltdown, but I am now doubling-down with more sales since MegaCorp is having a great run and taxes are likely going up.
Over the last 8 years I’ve sold over 115K MegaCorp stock options. It’s been like a part-time job selling them all. I have two more years on the options I have left, but I don’t want to leave them until the end. They are currently trading at $64, but were as low as $36 just 18 months ago. My average sale price has been close to $60.
I get taxed as ordinary income on the gross value of every stock option exercise which has created some huge tax bills for us. If the highest tax rate goes up in 2021, we would be hit hard. Now that the stock market has largely recovered, I’d rather sell now and live off the extra cash in the bank. I see more downside risk than upside opportunity in the market over the next couple years.
Ironically, as Biden talks about the rich needing to pay more, we’ll quickly drop our income to near $0 in 2021. We’ve paid lower taxes and seen the S&P 500 grow +52% behind the multi year‘Trump Bump’ and will be happy to sit back and see what opportunities come our way next.
Anyone else making any moves in advance of potential tax increases?