Don't Pull The Trigger On Those Stock Options Just Yet!

The newly elected Liberal government released its Update of Economic and Fiscal Projections on Friday, November 20, bringing with it some much-needed clarity on a particularly sensitive subject.

In a press conference discussing the update, the Honourable Bill Morneau, Minister of Finance, discussed one of the key platforms of the Liberal election campaign. The Trudeau government indicated that, if elected, they intended to limit the deductions related to the taxation of employee stock options. Currently, an exercise of stock options results in a taxable employment benefit to the employee equal to the excess of the market price (at the time of exercise) over the strike price of the options. However, there is a 50% deduction available against the benefit, provided certain conditions are met, effectively taxing only half the amount of the income. This affords stock option income tax treatment akin to the treatment given to capital gains.