Your stock comp is income. But it's not ordinary income.
For Bay Area employees and executives with stock options, RSUs, and ESPP, the timing of when you exercise and when you sell can change your tax bill by tens or hundreds of thousands of dollars. We help you make those decisions.
The decisions that matter most aren't on your stock plan portal.
If you work at a Bay Area technology company, a significant portion of your compensation probably comes in the form of stock — RSUs that vest on a schedule, options you can exercise within a window, or shares you can purchase at a discount through an ESPP. The mechanics are explained in your benefits documents. The hard part isn't understanding what these things are. The hard part is deciding what to do with them, and when.
Should you exercise your incentive stock options this year or next? Should you sell as soon as you can or hold for long-term capital gains treatment? Are you exposed to the Alternative Minimum Tax in a way that will surprise you next April? Does it make sense to enroll in your ESPP this cycle or skip it? Is your concentrated employer stock position bigger than it should be? Should you set up a 10b5-1 plan to systematize selling?
These are the high-leverage decisions, and they don't get answered by your stock plan administrator. They get answered by a financial planner who understands both the equity instruments and your full tax picture. That's the work we do.
Several equity decisions have hard deadlines that, if missed, cannot be undone. Among the most consequential:
ISO exercise timing — Incentive Stock Options expire, typically 90 days after you leave the company. Once they expire, the favorable tax treatment goes with them.
83(b) elections — For restricted stock or early-exercise option grants, an 83(b) election must be filed with the IRS within 30 days of grant or exercise. Miss the window and the tax planning opportunity is gone.
Post-IPO lockup expirations — When the lockup lifts, you may face a concentrated sale decision with serious tax consequences. Planning the year before the lockup ends, not the week after, is the difference between deliberate and reactive.
If any of these apply to you, the time to talk is before the deadline, not after.
Who this is for.
Tech employees with significant RSU income
Engineers, product managers, and individual contributors at established or pre-IPO tech companies, where RSU vesting is a meaningful portion of total compensation and the tax withholding doesn't match the actual liability.
Executives with ISO and NQSO grants
Directors, VPs, and senior leaders holding a mix of Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQSOs), where exercise and sale timing across multiple tax years requires deliberate planning to manage AMT and bracket exposure.
Pre-IPO and post-IPO equity holders
Employees and founders sitting on substantial paper wealth in pre-IPO shares, or recently public with lockups expiring. The decisions made in the 12 months before and after an IPO often dwarf every other financial decision of your life.
The kinds of equity comp we work with.
You don't need to be an expert in any of this to work with us. Here's the plain-language version of what each type is and where the planning work lives.
Restricted Stock Units
RSUs are company shares that get delivered to you on a vesting schedule, typically over four years. They're treated as ordinary income at the moment they vest — meaning your tax bill arrives whether or not you actually sell the shares.
The classic RSU planning problem: your employer withholds taxes at a flat rate that's almost always lower than your actual marginal rate, leaving you with an underpayment surprise at tax time. We help you plan around that, decide whether to hold or sell at vest, and integrate RSU income into your broader tax picture.
Incentive Stock Options
ISOs give you the right to buy company shares at a fixed price. The favorable tax treatment is the headline: if you hold the shares long enough after exercise, you may pay long-term capital gains rates instead of ordinary income rates. But there's a catch — exercising ISOs can trigger Alternative Minimum Tax (AMT), which most people don't see coming.
The exercise-and-hold decision is where the real planning happens. Exercising early in the year, sizing the exercise to manage AMT exposure, and planning the sale across multiple tax years — these decisions can shift your tax bill substantially.
Non-Qualified Stock Options
NQSOs are the more common option type, especially at larger public companies. When you exercise, the difference between the exercise price and the market price is taxed immediately as ordinary income — like a giant RSU vest. The shares you receive then have their own cost basis going forward.
The planning work centers on when to exercise (which year, in what size) to manage your marginal tax bracket, and when to sell to balance tax cost against the risk of holding a concentrated single-stock position.
Employee Stock Purchase Plans
ESPPs let you buy company stock at a discount, typically 15%, through paycheck deductions. For most employees, ESPPs are one of the highest-return benefits available — the discount is essentially free money — but the tax treatment depends on how long you hold the shares after purchase.
The planning question is usually about how much to enroll, when to sell the purchased shares (immediately versus holding for qualified disposition), and how the ESPP fits with the rest of your equity exposure.
The decisions we help you make.
The actual advisory work — the part that produces the value — sits in six recurring categories. Most equity holders face several of these at the same time.
When to exercise stock options
For both ISOs and NQSOs, the timing of exercise affects how much you pay in taxes, when you pay it, and whether you trigger Alternative Minimum Tax. We model exercise decisions across multiple tax years to find the timing that produces the best after-tax outcome for your situation.
When to sell exercised shares
Sell at exercise to capture certain gains, or hold for long-term capital gains treatment and accept the concentration risk. The right answer depends on your tax bracket, your overall portfolio exposure to the same stock, and your conviction about the company's prospects.
Managing AMT exposure
Exercising ISOs can trigger the Alternative Minimum Tax, sometimes substantially. We calculate your AMT exposure before you exercise, size the exercise to stay within tolerable AMT levels, and plan the sale to recapture AMT credits in future tax years.
Concentration risk and diversification
When a substantial portion of your net worth sits in a single employer's stock, your career and your portfolio are exposed to the same risk. We design diversification strategies that reduce concentration over time without creating an avoidable tax shock all at once.
10b5-1 plan structuring
For executives subject to insider trading restrictions, a properly structured 10b5-1 plan allows pre-scheduled stock sales to occur on a tax-aware, diversification-aware basis. We coordinate with your employer's stock plan administrator and counsel to set this up correctly.
Net Unrealized Appreciation (NUA)
For employees holding highly appreciated employer stock inside their 401(k), the NUA strategy can substantially reduce the tax cost of withdrawals at separation or retirement. The decision is technical and the window is narrow, but the savings can be significant.
Five common mistakes — and how we help you avoid them.
Twenty years of equity compensation work has surfaced a recognizable set of mistakes. Most of them aren't about the equity itself; they're about how the equity interacts with the rest of your tax picture.
1. Under-withholding on RSU vests
Employer-default withholding on RSU vests is almost always less than the actual marginal tax rate for high earners. The shortfall shows up as an underpayment penalty at tax time — and a significantly larger tax bill than expected.
2. Exercising ISOs without modeling AMT
The Alternative Minimum Tax is the most-missed cost of ISO exercise. We see prospects every year who exercised ISOs, held the shares, and then discovered an unexpected AMT bill the following April. Modeling AMT before exercise — not after — is fundamental.
3. Holding too long for "long-term gains" and watching the stock drop
The classic trap: exercising NQSOs or ISOs, then refusing to sell for fear of triggering ordinary income or disqualifying treatment, only to watch the stock decline below the exercise price. The tax tail wagging the investment dog.
4. Letting employer-stock concentration build to 50% or more of net worth
When the same company that pays your salary also holds most of your savings, a bad quarter at work can become a financial crisis. Concentration risk compounds quietly until something happens, and then it compounds quickly.
5. Treating equity decisions in isolation from the rest of the tax return
Equity decisions interact with every other piece of the tax picture — spouse income, rental income, capital gains harvested elsewhere, charitable giving, retirement contributions. Equity decisions made without the rest of the tax return in view are guesses, not strategy.
Modeling an ISO exercise decision side by side.
The way we approach a specific equity decision is the same way we approach every major planning decision: we model the alternatives side by side so the trade-offs become visible. Below is an illustration of how we would think through a typical ISO exercise decision.
Exercise and sell in same year
Exercise the ISOs and sell the shares in the same calendar year. This converts ISO treatment into ordinary income treatment (a disqualifying disposition), but eliminates AMT exposure and removes the concentrated stock position immediately.
Exercise and hold for qualified disposition
Exercise the ISOs and hold the shares for the required period to qualify for long-term capital gains treatment on the entire spread. Maximizes the tax benefit of ISO treatment, but creates AMT exposure in the year of exercise and concentration risk while holding.
Multi-year staged exercise
Exercise a portion of the ISOs in the current year (sized to manage AMT exposure), exercise more in the following year, and sequence the eventual sales across multiple tax years. Balances tax efficiency, concentration management, and flexibility.
None of these is universally right. The right answer depends on your tax bracket, your AMT capacity in the current year, your concentration exposure, your conviction about the company's prospects, and the time horizon you have to plan over. The model makes the trade-offs visible. Your judgment, informed by the model, makes the decision.
Equity decisions are tax decisions, retirement decisions, and estate decisions — all at once.
An equity exercise decision affects your current-year tax bill, your retirement contribution capacity, your charitable giving strategy, your concentration risk, and your estate exposure. Working with an advisor who only sees the equity piece is working with half the picture.
Index Gurus integrates equity planning with the rest of your financial life: with our comprehensive financial planning for HNW households, with our retirement income planning process as you approach distribution years, and with our active investment management for the diversified portfolio that sits alongside your concentrated employer stock.
How an engagement works.
Discovery call
A 30-minute conversation, at no cost, to understand your equity grants, your upcoming decisions, and your full tax picture. We will tell you honestly whether the engagement is a fit before either of us invests more time.
Strategy session
A focused engagement to model your specific equity decisions — exercise timing, AMT exposure, sale sequencing, and diversification strategy — and produce written recommendations you can act on. Coordinated with your CPA where relevant.
Ongoing advice
For clients with continuing equity grants and concentrated positions, we provide ongoing advisory work across vesting cycles, exercise windows, and sale decisions — integrated with comprehensive planning and investment management as your situation warrants.
Frequently asked questions.
What's the difference between an ISO and an NQSO?
An Incentive Stock Option (ISO) is a stock option type with potentially favorable tax treatment: if you hold the shares for the required period after exercise (more than two years from grant and one year from exercise), the entire gain may be taxed at long-term capital gains rates. The catch is that exercising ISOs can trigger Alternative Minimum Tax (AMT) in the year of exercise.
A Non-Qualified Stock Option (NQSO) does not have the favorable ISO treatment. When you exercise, the difference between the exercise price and the market price is taxed immediately as ordinary income. The shares you receive then have their own cost basis for future gains or losses. NQSOs are simpler from a tax perspective but generally less tax-efficient than well-managed ISOs.
What is the Alternative Minimum Tax (AMT) and why does it matter for ISOs?
The Alternative Minimum Tax is a parallel tax system designed to ensure high-income households pay at least a minimum amount of tax. When you exercise ISOs and hold the shares (rather than selling them in the same year), the "spread" between your exercise price and the fair market value at exercise is treated as income for AMT purposes — even though you have no actual cash from the exercise.
This is the surprise that catches many ISO holders: they exercise their options, hold the shares to qualify for long-term capital gains treatment, and then receive a substantial AMT bill in April that they didn't have cash to cover. Modeling AMT exposure before exercising is one of the most important things we do.
What is an 83(b) election?
An 83(b) election is a tax filing that lets you choose to pay ordinary income tax on the value of restricted stock (or early-exercised options) at the time of grant or exercise, rather than as the stock vests over time. The election must be filed with the IRS within 30 days of the grant or exercise — there are no exceptions to the deadline.
An 83(b) election makes sense when the current value of the stock is low (so the tax cost of the election is small) and you believe the stock will appreciate substantially before it fully vests. It can substantially reduce total tax cost on early-stage equity, but it also accelerates tax payment and creates the risk of paying tax on stock that later becomes worthless.
What is a 10b5-1 plan?
A 10b5-1 plan is a pre-scheduled stock trading plan that allows insiders — typically executives and directors — to buy or sell company stock without violating insider trading rules. The plan must be established when the insider does not have material non-public information, and it must specify the amount, price, and timing of trades in advance.
For executives subject to insider trading restrictions, a properly designed 10b5-1 plan is how you systematically diversify a concentrated employer-stock position without running into trading blackouts. We coordinate with the client's employer counsel and stock plan administrator to design plans that align with the client's broader financial planning.
What is a "qualified disposition" of ISO shares?
A qualified disposition of ISO shares occurs when you hold the shares for more than two years from the grant date and more than one year from the exercise date before selling. When both holding periods are satisfied, the entire gain from grant price to sale price is taxed at long-term capital gains rates.
If you sell before satisfying both holding periods, the disposition is "disqualifying" — the bargain element at exercise is taxed as ordinary income, and any subsequent gain is treated as short-term or long-term capital gain depending on how long you held the shares.
What is the NUA strategy?
Net Unrealized Appreciation (NUA) is a specific tax strategy for employees holding highly appreciated employer stock inside a 401(k). At separation from service or retirement, you can transfer the employer stock to a taxable brokerage account and pay ordinary income tax only on the cost basis of the shares — not on the full market value. The appreciation is then taxed at long-term capital gains rates when the shares are eventually sold.
For employees holding stock that has appreciated substantially over a long career, the savings can be significant. The election is technical and one-time only, and it interacts with rollover decisions in ways that require careful planning before you separate from your employer.
Do you work with pre-IPO companies and post-IPO lockup decisions?
Yes. Pre-IPO and immediate post-IPO planning is one of the most consequential planning windows we work in. For pre-IPO employees, the decisions include early exercise considerations, 83(b) elections, secondary market sales, and tax planning for the eventual liquidity event. For post-IPO employees, the focus shifts to lockup expiration planning, diversification strategy, and structuring sales to manage the concentrated tax exposure that builds up during the IPO itself.
The most valuable conversations happen in the 6-to-12 months before an IPO, when there is still time to make 83(b) elections, exercise options, and structure giving or trust strategies that may not be available afterward.
How do you coordinate with my CPA?
Equity compensation decisions touch the tax return directly, which makes CPA coordination essential. We routinely work with clients' CPAs to share equity grant details, model AMT exposure together, plan estimated tax payments, and ensure the tax return reflects the equity decisions as intended. If you do not have a CPA familiar with equity compensation, we can recommend practitioners we have worked with successfully.
Is there an asset minimum for equity compensation planning?
No. Standalone financial planning engagements covering equity compensation are available without an asset minimum. The $1 million minimum applies only to ongoing investment management. Many clients begin with a focused equity compensation planning engagement and later transition to a broader ongoing relationship as their situation evolves.
Are you a fiduciary?
Yes. Index Gurus, Inc. is a registered investment adviser and operates as a fiduciary at all times. We accept no commissions, referral fees, or third-party compensation from product providers, brokerages, or employer stock plan administrators. Our only revenue is the fee our clients pay us, which means the equity planning advice you receive reflects only what we believe is in your best interest.
Equity decisions don't wait.
If you have a vesting cliff coming, an exercise window open, a lockup expiring, or a concentration position that's grown larger than you intended — schedule a complimentary 30-minute discovery call. We will review your situation and tell you honestly whether the engagement is a fit.
Index Gurus, Inc. is a registered investment adviser. Information on this page is educational and does not constitute personalized investment, tax, or legal advice. Tax treatment of stock options, restricted stock units, employee stock purchase plans, and related equity instruments is highly fact-specific and depends on each individual's circumstances, applicable federal and state tax law in effect at the time, and the specific terms of the employer's plan documents. Scenario examples and modeling approaches are illustrative only and do not represent the experience of any specific client. References to types of client situations are illustrative of categories of work the firm has performed; they are not testimonials. All investments involve risk, including possible loss of principal. Concentrated single-stock positions, including positions in employer stock, carry substantial risk of loss. Past performance is not indicative of future results. Please review Form ADV Part 2A for additional information regarding services, fees, and conflicts of interest, and consult your own tax and legal advisors before making any equity compensation decision.
CFP Board owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER® in the U.S.