Equity Compensation
The most complicated money you'll ever make.
RSUs, ISOs, NSOs, ESPPs, AMT, concentrated stock. Each type is taxed differently, each one has a window, and missing it is expensive. This is the part of your compensation a generic advisor was never built to handle.
85%
of equity compensation participants say they want more help understanding what they actually have.
Schwab Workplace Participant Survey, 2025
1 in 3
the share of their investment portfolio the average tech employee holds in a single company's stock.
Schwab Workplace Participant Survey, 2025
Know What You Hold
Four kinds of equity. Four different sets of rules.
ISO
Incentive Stock Options
Exercise timing determines whether you pay long-term rates or trigger AMT. The favorable tax treatment of an ISO only exists inside specific holding-period rules. Exercise without modeling your AMT exposure first, and you can owe tax on gains you have not yet received in cash.
NSO
Non-Qualified Stock Options
You owe ordinary income tax at exercise, full stop. The spread between your exercise price and the market price on the day you exercise is taxed as ordinary income, including FICA and state tax. Simpler than an ISO, but not cheaper. When you exercise is a tax decision.
RSU
Restricted Stock Units
Your employer withholds 22%. Your bracket may be 37%. RSUs vest as ordinary income, and the default withholding almost always underpays. Add the concentration risk of holding shares in the company that also signs your paycheck, and RSUs need an active strategy, not a passive one.
ESPP
Employee Stock Purchase Plan
Sell too soon and the discount is taxed as ordinary income. One of the best benefits available, but the tax treatment splits on when you sell. A qualifying disposition can preserve long-term capital gains rates. A disqualifying one erases that advantage entirely.
The One That Surprises People
AMT: a tax bill on money you never received.
When you exercise an ISO and hold the shares, the difference between the exercise price and the fair market value, the bargain element, does not show up on your regular tax return. It shows up in the Alternative Minimum Tax calculation. So you can exercise, hold, sell nothing, receive no cash, and still owe a significant tax bill in April.
This is the single most common and most expensive surprise in equity compensation. It is also one of the most plannable. How many shares to exercise, in which tax year, and how it interacts with the rest of your income are all decisions that can be modeled in advance, before the bill exists rather than after.
A simplified illustration
Suppose you exercise 10,000 ISOs with a $2 strike price when the shares are worth $25. You have paid $20,000 to exercise and received no cash, but the $230,000 bargain element can become a preference item in your AMT calculation. The cash never arrived; the potential tax exposure did. Modeling this before you exercise is the entire point.
Hypothetical and simplified for illustration only. Not tax advice. Actual AMT depends on your full tax situation and current law. Consult a qualified tax professional.
Concentration Risk
Your paycheck and your portfolio shouldn't ride on the same company.
Every vest grows the share of your net worth tied to a single stock, often the same company that pays your salary. It builds quietly, and selling can feel like betting against your own team. But concentration is risk, whether or not it feels like it.
The goal is not to sell everything tomorrow. It is to diversify deliberately, on a schedule, coordinated with your tax picture, so you reduce the risk without triggering an avoidable tax bill in the process.
Beyond the Basics
The decisions that get more complex as your equity does.
83(b) elections
A 30-day window with long-term consequences for early-exercised options and restricted stock.
QSBS (Section 1202)
Potentially significant tax treatment for qualifying early-stage startup shares.
Pre-IPO vs. public
Illiquid equity, tender offers, and lockups change the playbook entirely.
10b5-1 plans
A structured, pre-set way to sell company stock over time at a public company.
If some of these are new and some are already keeping you up at night, that is exactly the conversation worth having.
How Eclipse Helps
We model the decision before you have to make it.
We map every grant and vesting date, model the tax consequences of exercising and selling, build a diversification strategy that fits your timeline, and coordinate with your CPA so the plan and the tax return tell the same story. These decisions do not wait for tax season. The earlier we look, the more options you have.
Let's look at what you actually have.
A short conversation about your equity and what a real plan could do. No pitch, no obligation.
Schedule an Introduction →
Eclipse Financial Advisors and its representatives do not provide tax or legal advice. The information on this page is for educational and informational purposes only and should not be construed as tax or legal guidance. Tax treatment of equity compensation depends on your individual circumstances and current law, which is subject to change. You should always consult a licensed and qualified tax professional, CPA, attorney, or other appropriate professional regarding your specific situation before making any financial, tax, or legal decisions.