On paper you're wealthier than you've ever been, and you can't spend a dollar of it. The number in the equity portal moves every day, colleagues trade rumors about the lockup date, and the grant agreement you signed years ago uses terms you've never had a reason to look up. Meanwhile a tax bill you can't yet size is forming somewhere behind all of it.
The part that keeps people up at night is the asymmetry. Sell too early and you watch the stock triple while your colleagues get rich. Hold too long and you watch a life-changing sum become an ordinary one, with tax already paid on the higher number. Both regrets are available. The only way out is deciding in advance which one you can live with, and we'd rather help you do that on a quiet Sunday than on lockup day.
Know which instrument you hold, because the tax rules differ
People say "my stock" as if there's one thing. There are several, they're taxed at different moments, and the moment is usually the part that matters. Pull your grant agreements and your equity portal, and write down what you have and when each piece vests or expires.
The mechanics below are general. How they apply depends on your grant terms, your state, and your overall tax picture, so treat this as the vocabulary you need before a conversation with your CPA, not a conclusion.
- Restricted stock units. The value of the shares becomes ordinary income at vesting and shows up on your W-2. You have no say in the timing. Any movement after vesting is a capital gain or loss measured from the vest-date value.
- Non-qualified stock options. Exercising creates ordinary income equal to the spread between the exercise price and that day's market value. You control when that happens, which makes the exercise date a planning decision.
- Incentive stock options. Exercising creates no ordinary income for regular tax purposes, but the spread is an adjustment for the alternative minimum tax, which surprises people every single year. Hold the shares more than two years from grant and more than one year from exercise and the whole gain above the exercise price is generally long-term capital gain. Sell sooner and part of it converts to ordinary income.
- Employee stock purchase plan shares. You buy at a discount, and the discount is generally taxed as ordinary income. Whether the rest is short-term or long-term depends on holding periods measured from both the offering date and the purchase date.
- Restricted stock, meaning actual shares subject to forfeiture rather than units. This is the only category where an 83(b) election is available, and the filing deadline is 30 days from grant. RSUs aren't eligible.
Concentration is the risk that actually shows up
The number worth calculating isn't what your equity is worth. It's what share of your total net worth sits in one company's stock, counting vested shares, unvested grants you expect to receive, and any of that stock inside your 401(k).
Then add the exposure that doesn't appear on any statement. Your salary comes from the same company. So does your bonus. If the business struggles, your income and your largest asset drop together, at the exact moment you'd least want to sell. Employees at a single company have lost both at once often enough that it's worth taking seriously.
There's no universally correct concentration limit, and any advisor who gives you one as a rule is oversimplifying. What matters is that you pick a threshold deliberately, write it down, and decide what happens when you cross it. A number you can defend beats the theoretically optimal one you'll abandon under pressure.
Lockups, trading windows, and pre-scheduled selling plans
After an IPO, insiders and employees are typically barred from selling for a period set in the offering documents. The length varies by deal, and some agreements release shares in stages or tie an early release to a price condition or an earnings date. Read your own terms rather than relying on what someone said in the break room.
Once the lockup lifts, company policy takes over. Most public companies restrict trading to open windows around earnings, require pre-clearance for certain employees, and impose extra requirements on officers and directors, including public filings after each trade. A written trading plan under Rule 10b5-1 lets an insider set up sales in advance and have them execute on a schedule, which removes the need to decide during a window when you may know something the market doesn't. Those plans require a cooling-off period before trades begin, so adopt one early, not the week you want to sell.
Where the shares and the proceeds should sit
Selling is only the first decision. The proceeds have to land somewhere, and which account they land in affects what you keep. Highly taxed income like bond interest generally belongs in a tax-deferred account, while assets you expect to hold a long time and sell at capital gains rates often fit better in a taxable account. Getting this backwards is common and quietly expensive over a couple of decades.
Appreciated shares also have a use beyond selling them. Giving long-term appreciated stock directly to a public charity or a donor-advised fund generally allows a deduction at fair market value without recognizing the gain, subject to income-based limits. If you were going to give anyway, giving shares beats giving cash, and a donor-advised fund lets you take the deduction in a high-income year while choosing recipients later.
You'll also hear about exchange funds and other structures marketed as ways to diversify without selling. Some are legitimate tools. All of them carry costs, long lockups, and terms that deserve scrutiny before enthusiasm. Read the offering documents and ask who gets paid.
Write the rules before the price moves
Decisions made while watching a ticker are worse than decisions made on a quiet Sunday. Before the lockup date, put on paper how many shares you'll sell, on what schedule, and what would cause you to change the plan. Then follow it. A schedule that sells over several quarters removes the requirement that you correctly identify the peak, which nobody does reliably, and we won't pretend otherwise.
Handle the tax side in the same sitting. RSU withholding often runs at a flat statutory rate for supplemental wages that can sit well below the marginal rate a large vest actually pushes you into, and the gap doesn't surface until you file. Estimate the shortfall, set aside cash or make an estimated payment, and check whether the year will also trigger extra taxes on investment income. Doing this the month of the vest is far easier than reconstructing it in April.
What to do next
- Build one page listing every grant you hold: type, quantity, vest or expiration dates, exercise price, and lockup terms. Most people have never seen all of it in one place.
- Calculate what percentage of your net worth your company stock represents today, including unvested grants and anything in your retirement plan. Then decide the threshold you're willing to live with.
- Book a 20-minute introductory call before your next vest or lockup date. We'll talk through the sequence of decisions and what your CPA needs to know in advance.
Frequently asked questions
Should I sell everything the day the lockup lifts?
That depends on your concentration, your tax year, and what the money is for, and nobody can answer it responsibly without those details. What we can say is that selling on a predetermined schedule spreads the timing risk and takes the decision out of a single emotional day. Some people sell down to a threshold immediately and stage the rest. What matters is choosing the approach before the date arrives.
Will my company's RSU withholding cover my actual tax bill?
Often it won't. Employers typically withhold at vesting at the flat statutory rate for supplemental wages, and a large vest can push your income into a higher bracket than that rate covers. The difference shows up when you file. Estimate it during the year and plan for the shortfall rather than discovering it in the spring.
What is an 83(b) election, and does it apply to me?
It's an election to be taxed on restricted stock at grant rather than as it vests, which can matter when the value at grant is low. It applies to actual restricted shares and early-exercised options, not RSUs. The filing deadline is 30 days from grant and it's strict, so if you think you're eligible, confirm the current requirements with your CPA right away.
What if my company never goes public?
Then you're holding an illiquid asset with real costs attached. Exercising private options can require cash and create a tax bill on paper gains you can't sell shares to cover, which is how people end up owing tax on stock that later becomes worthless. Options also expire, often shortly after you leave. Understand your exercise window and what a secondary sale would take well before you need the answer.
How does Florida's lack of a state income tax affect this?
It removes a layer, and it doesn't remove the planning. Equity compensation income can still be sourced to a state where you worked when the grant was earned, so someone who moved to Florida from a high-tax state may owe there on part of a vest. Residency and sourcing rules vary by state, which makes this a question for a CPA who handles multistate returns.
