What does capital gains tax mean?
Capital gains tax is a tax that is imposed on the profit or gain from the sale of a capital asset. A capital asset is any property, investment, or item that is not considered to be a current asset, such as cash or inventory. An equity grant is considered as a capital asset.
When you sell a capital asset for more than you paid for it, the difference between the sale price and the purchase price is considered a capital gain.
If the sale price is less than the purchase price, the difference is considered a capital loss.
The capital gains tax is only imposed on the portion of the gain that exceeds a certain threshold, called a capital gains tax rate. The rate will vary based on the type of asset and the holding period.
Long-term capital gains (assets held for more than one year) are typically taxed at a lower rate than short-term capital gains (assets held for less than one year). The capital gains tax rate is also subject to change by the government, and it may vary based on the income level of the taxpayer, with higher income individuals paying a higher rate than those with lower income.
It's important to note that capital gains tax rules and regulations may vary by country or jurisdiction, so it is advisable to consult with a tax advisor or a financial professional for specific information about your country or state's capital gains tax laws.
What does employee social tax mean?
Employee social tax, also known as payroll tax or social security tax, is a tax that is imposed on salary, and is typically used to fund social welfare programs such as old-age pensions, disability benefits, and unemployment insurance.
The amount of employee social tax that is withheld from the paycheck is typically based on a percentage of the salary, and the rate may vary depending on the country or jurisdiction.
In some countries, employee social tax is shared between the employee and the employer, with each party paying a portion of the tax. In other countries, only the employee is responsible for paying the tax.
It's important to note that employee social tax laws and regulations may vary by country or jurisdiction, so it is advisable to consult with a tax advisor or a financial professional for specific information about your country or state's employee social tax laws.
How does withholding work for stock options and RSU ?
When you are granted stock options or restricted stock units (RSUs), they are typically subject to a vesting schedule, meaning that you have to meet certain conditions before exercising options or receiving the shares of stock. These conditions can be found in the terms and conditions set by the company in the company equity plan.
In some countries or jurisdictions, withholding for stock options and RSUs typically occurs when options are exercised or shares are vested. The company will typically withhold a certain number of shares (or cash equivalent value) to cover the taxes that will be owed on the transaction. The specific amount of withholding will depend on your tax situation and the stock's fair market value at the time of exercise or vesting.
It's always recommended to consult with a tax advisor to understand the tax implications related to your specific situation.