I have a home equity loan- ~$42K at 7.5% and about $10K in credit card debt at 16%+. I have several hundred thousand dollars in vested stock options from my company (part of my long term incentive plan). I also have about $80K in stocks in my Fidelity account. Does it make more sense to cash in the options or sell shares from my fidelity account to pay off the debt? The options are in a very favorable position right now (3M). The tax consequences of selling the options versus selling my shares is what has me stuck. Which one is a better idea or how do I figure this out?
The most tax efficient way to get some cash would be to sell some stocks from the Fidelity account that have the lowest capital gains. The tax will typically be 15% of the capital gains. This will be a one-time cost which should save you money compared to paying 7.5% on the loan year after year.
Tax on selling the stock options will probably be higher, since you imply there would be high capital gains, and some of the proceeds might even be taxed as income, not capital gains.