Planning topic · High income and equity
Salary, bonus and stock landing in one year push income into higher brackets, and the tax withheld is often too little — discovered only at filing time. When to exercise, when to sell and how to use retirement accounts can all be computed first.
Why compute first
Most of the tax on equity compensation is fixed at the moment it happens and is hard to change afterwards.
Withholding is treated as paid evenly through the year, so raising wage withholding late in the year can cover an earlier shortfall — a late estimated payment cannot. Few people know this rule.
When
Most exercise, vesting and sale dates can be planned ahead.
One by one
Not all of them apply to you. Step one is deciding which do.
RSUs are wage income at market value on the vesting date. Employers usually withhold federal tax on such supplemental wages at 22%, and 37% above $1 million for the year.
What vests this year and its likely value, your real rate, and the withholding or estimates still needed.
No regular tax at exercise, but the spread enters AMT. Holding more than two years from grant and one year from exercise makes the gain long-term. The 2026 AMT exemption is $90,100 ($140,200 joint) and begins to phase out at $500,000 ($1,000,000 joint) — earlier than in 2025.
How much to exercise each year with little or no AMT, and when to sell.
The NSO spread at exercise is wages that year. An ESPP may offer up to a 15% discount, limited to $25,000 of stock a year by grant-date value; the holding period decides how the discount is taxed.
The order of exercises and sales, holding periods, and whether W-2 and broker basis agree.
Within 30 days of receiving stock subject to vesting (or exercising early) you may elect to be taxed on its value then, with later growth as capital gain. The deadline cannot be extended.
The value at the time, the company’s prospects and the chance you leave: tax paid is not refunded if the stock is forfeited.
For 2026 the 401(k) employee limit is $24,500 (plus $8,000 from age 50) and $72,000 in total with employer and after-tax contributions. Direct Roth IRA contributions phase out between $153,000 and $168,000 ($242,000–$252,000 joint); a nondeductible contribution followed by conversion is taxed pro rata across all traditional IRA balances.
Whether your plan allows after-tax contributions and in-plan conversions, and your existing traditional IRA balances.
The 2026 HSA limits are $4,400 self-only and $8,750 family, with a high-deductible health plan. Appreciated stock held more than a year can be deducted at market value; from 2026 only gifts above 0.5% of AGI count for itemizers, and the benefit is trimmed in the top bracket.
Bunching several years of gifts into a high-income year, a donor-advised fund, and cash versus stock.
Gain after vesting is long-term after one year (0%, 15% or 20%), plus the 3.8% net investment income tax at higher incomes. A loss is disallowed if the same stock is bought back within 30 days of the sale.
How much of the family’s assets sits in employer stock, a plan to sell in stages, and losses to set against gains.
Each state has its own residency tests, and the old state may still tax equity income earned while you worked there. Qualified small business stock (QSBS) can exclude part or all of the gain: for stock acquired after July 4, 2025, 50%, 75% and 100% after 3, 4 and 5 years.
The timing of a move against vesting and exercise; whether the stock qualifies as QSBS and whether your state follows.
Common mistakes
It shows up at filing time, but the cause is a year earlier.
How we work
The same levels as our tax planning service, built around your income and equity.
Before an exercise, a sale or a job change, settle the specific questions. The CPA explains the rules and options; you receive a written recap.
From your grants and vesting schedule, the tax under several exercise and sale plans, with retirement accounts and estimates, written up and explained.
Quarterly reviews of income and share price with updated estimates; numbers first whenever a grant, an exercise or a job change comes up.
Typical situations
Hypothetical situations that show how planning works — not client results. Conclusions differ for everyone.
The first year after the IPO: much of a four-year grant vests next year, and a home purchase is planned.
The company is still private, the strike price is low, and options expire 90 days after leaving.
Both work in tech and plan to move from California to a state without income tax next year, each with unvested RSUs.
Employers generally withhold a flat 22% of federal tax on stock and other supplemental wages, while your real rate may be 32%, 35% or 37%. The gap is yours to cover by higher withholding or estimates.
There is no general answer. It depends on your other income that year, the spread, AMT and your cash. Spreading exercises over several years is often steadier than one year — but it must be computed.
It turns future growth into capital gain and starts the holding period; but tax paid is not refunded if the stock is forfeited or falls. It depends on the value then and your own judgment.
Check whether your 401(k) allows after-tax contributions with in-plan conversion, or consider a nondeductible IRA contribution followed by conversion — minding other traditional IRA balances.
Whether to sell is an investment decision, and we do not give investment advice. We can show the tax of selling at different times, for you and your investment adviser to decide.
Usually in proportion to the time you worked there. Each state has its own rules, so it must be looked at specifically.
Yes. The return after planning can come to us too, or planning alone.
Fixed fees, quoted before work starts. They follow the scope and complexity of the work, never the amount of tax saved.
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Book a one-on-one paid consultation with a CPA. The fee is credited if you move on to planning.
This page is general information, not tax advice for your situation and not investment advice. Conclusions depend on the facts you provide and the law in force; the dollar amounts are 2026 figures, adjusted each year, and state rules differ.
