Clients who receive incentive compensation, such as stock options from their employer, often face additional tax challenges. It’s not uncommon for employees to accumulate concentrated positions of company stock over time. When too much of a client’s portfolio is invested in a single stock, they run the risk of jeopardizing their financial wellbeing if the stock price falls.

One of the biggest impediments to diversifying a highly appreciated concentrated stock is capital gains taxes, including state and local taxes, which can equal 15 to 35% of the value of the stock. Position yourself as a resource to help clients diversify their concentrated holdings in a tax-efficient manner. One option is to consider securities that offer a tax advantage, such as those that pay qualified dividends. If they have stock options, discuss when and how to exercise them. Depending on the type of stock options they have, there are various tax implications.

Finally, most clients may benefit from holding securities for at least one year to avoid higher short-term capital gains taxes. As a financial advisor, you can partner with your client and their tax professional to help develop a plan that meets their needs.

Take a few minutes to explore the Eaton Vance Tax Education Center at for useful resources to help you meet a variety of tax-forward investing needs.

Tax-loss harvest transactions aren't beneficial in a retirement account because the losses generated in a tax-deferred account cannot be deducted.

The Firm does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Tax laws are complex and subject to change. Investors should always consult their own legal or tax professional for information concerning their individual situation.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.