Impact of Inflation Reduction Act on a huge income year

[KSPowell]

Hi. I was laid off this summer. That comes with a large severance package ($135K) and I have six months to liquidate my stock options (worth ~$1.6m). 

I haven't been able to find much information on how the Inflation Reduction Act will impact my taxes, except that those with an income less than $400K won't be impacted. That won't be me this year. How can I evaluate the impact of liquidating my stock options this year vs next year vs some this year and some next (I've confirmed that this option is available to me.)

[Anonymous]

Hello KSPowell,

Thank you for participating in this Ask the Experts event. As to your question, there really aren't any changes in terms of tax rates in the inflation reduction act, but there are a number of tax credits that have been expanded or extended. These are credits primarily for clean energy (electric vehicles, home energy, etc.) and healthcare.

All things equal, you would be better off splitting your stock liquidation between the two years, but I wouldn't be able to tell you how to make that split. Having said that, you should probabaly liquidate more next year than this year. The reason for this is you already have however many months of income through the date you were laid off plus the severance package. So, if you split it 50/50 between this year and next you will have more taxable income this year than next. However, if you already have another job or plan to get one next year, you will need to take that into consideration, too.

I hope that helps, at least a little.