Incentive Stock Options qualify for long-term capital gains rates if held correctly, but the spread at exercise is an AMT preference item. Strategic exercise timing minimizes total tax.
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Book A Free Strategy Call to UnlockRestricted Stock Units vest as ordinary income. Strategic timing of sales, pairing with charitable contributions, and tax-loss harvesting can significantly reduce the tax impact.
An employee with $300,000 in RSU income who donates $50,000 of appreciated shares to a DAF avoids $11,500 in capital gains and gets a $50,000 deduction — saving $30,000 total.
Consider the 83(b) election for restricted stock (not RSUs). Pair RSU income years with large deductions. Sell immediately at vesting to avoid double taxation risk.
A UNK client — a senior software engineer at a public tech company — had $120,000 in RSUs vesting in 2026. Her company automatically withheld shares to cover taxes at the 22% supplemental rate, but her actual marginal rate was 35%. Uncle Kam identified the underwithholding issue and helped her make estimated tax payments to avoid penalties. More importantly, he modeled the optimal selling strategy: sell shares immediately at vesting to avoid concentration risk and lock in the ordinary income tax basis, then use tax-loss harvesting in her brokerage account to offset the RSU income.
RSUs vesting this year? The default withholding is almost always wrong. Book a call before your next vest date.
Be the Next Win — Book a CallRSUs are taxed as ordinary income at vesting. The fair market value of the shares on the vesting date is included in your W-2 as compensation income, subject to federal income tax, Social Security tax (up to the wage base), and Medicare tax (including the 0.9% Additional Medicare Tax if applicable). Your cost basis in the shares equals the amount included in your W-2.
Most employers withhold at the IRS supplemental wage rate of 22% (or 37% for amounts above $1 million). If your actual marginal tax rate is higher than 22% — which is common for tech workers with significant RSU income — you will owe additional taxes at filing. To avoid underpayment penalties, you should either increase withholding on your regular paycheck or make quarterly estimated tax payments.
From a tax and risk management perspective, selling immediately after vesting is often the right choice. Your cost basis equals the vesting-date value, so there is no tax benefit to holding (you have already paid ordinary income tax on the full value). Holding concentrates your financial exposure to your employer — the same company that employs you. If you want to hold for long-term capital gains treatment, hold for more than 1 year after vesting.
If you hold RSU shares for more than 1 year after vesting, they become long-term capital gain property and can be donated to a charity or DAF at fair market value, avoiding capital gains tax on the appreciation since vesting. If you donate within 1 year of vesting, the deduction is limited to your cost basis (the vesting-date value). Planning the timing of donations around the 1-year holding period can maximize the charitable deduction.
RSUs are a promise to deliver shares at a future date (vesting date) and are taxed as ordinary income at vesting with no upfront cost to the employee. Stock options (ISOs and NSOs) give you the right to purchase shares at a fixed price (the exercise price) and have more complex tax treatment. RSUs are simpler and always have value (as long as the stock price is above zero); options only have value if the stock price exceeds the exercise price.
Executives and highly compensated employees can defer a portion of their compensation to future years, deferring income tax until the funds are received — typically in lower-income retirement years.
Deferring $200,000 in bonus income from a 37% bracket to retirement at a 24% bracket saves $26,000 in taxes on that deferral.
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Book A Free Strategy Call to UnlockNon-qualified deferred compensation plans allow highly compensated employees to defer a portion of salary or bonus to a future date, deferring income taxes until distribution.
An executive deferring $200,000 of bonus income at a 37% rate saves $74,000 in current-year taxes. If distributed at a 24% rate in retirement, permanent savings of $26,000.
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Book A Free Strategy Call to UnlockR&D credits are a dollar-for-dollar tax credit — not just a deduction — and apply to software development wages.
NOL carryforwards from startup losses can offset future profitable years indefinitely.
Qualified Small Business Stock (QSBS) under §1202 can exclude up to $10M in gains from federal tax.
This write-off is commonly used by the following taxpayer profiles. Click to see all strategies for your situation.
