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Equity compensation, in depth
Plain-English walkthroughs of the topics our calculators run on. Written for tech employees with real equity at stake, with the math, the trade-offs, and the landmines spelled out.
Alternative Minimum Tax
Four AMT mistakes you can still fix before December 31
Exercising $1M of ISOs in one year can cost up to $450K of AMT in California, that's before you sell your shares. Due in cash before April 15th. Splitting across years or shifting from late December to early January can save most of it. Four common timing and structure deathtraps shape that outcome. We price each, with the calculator to find your specific crossover.
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Alternative Minimum Tax
AMT credit recovery in plain English
The alternative minimum tax (AMT) you pay on an exercise-and-hold ISO is mostly a prepayment, not a cost: Form 8801 carries it forward as a credit against future regular tax. The catch is the pace. A single filer earning $250,000 claws back about $14,900 a year, so a $134,654 credit takes nine-plus years unless something changes. Here are the mechanics, what speeds them up, and how the calculator schedules around them.
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Alternative Minimum Tax
Form 6251, walked through with a real ISO exercise
Form 6251 is where the alternative minimum tax (AMT) actually happens: a second computation of your entire federal tax that adds your incentive stock option (ISO) bargain element back on line 2i and bills the excess on line 11. We fill it in with one real exercise: 10,000 ISOs at a $5 strike and $50 fair market value, on $250,000 of income, end at $134,654 of AMT, due in cash before the shares are ever sold.
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Private-company liquidity
Pre-IPO secondary sales: the tax mechanics
A tender offer is often the only liquidity window a private company opens before the IPO, and what you keep depends on what you sell into it. Already-exercised incentive stock options (ISOs), unexercised options, restricted stock units (RSUs), and qualified small business stock (QSBS) each carry different tax mechanics; the wrong lot converts long-term gains to ordinary income or breaks a five-year clock. The price and the deadline are fixed for you. Which shares to sell is the decision, and it is tax math.
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Non-qualified stock options
Six NSO mistakes your tax advisor probably won't mention
Did you know brokerages may actually underreport your true NSO cost basis (per IRS basis-reporting rules)? Many tax software products and advisors miss this small detail. This and five other common NSO mistakes may cost you a small fortune. We price each trap, with the calculators to run your own grant.
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Restricted stock units
Five RSU mistakes that quietly grow your April tax bill
Your employer withholds federal tax on every RSU vest at 22%. Your true marginal rate is probably 32% or 35%. The gap shows up as a four-to-six-figure April surprise. This and four other common RSU traps determine what you owe at filing. We price each trap, with the calculator to find your specific gap.
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Concentration and diversification
Five costly stock concentration mistakes
96% of collective US stocks have historically underperformed T-bills (Bessembinder 2018). Do you think your stock is in the lucky 4%? Concentrated equity exposure has a wider distribution of outcomes than gut feel suggests. Five common traps decide whether de-concentration costs more in tax than the risk it eliminates. We size each trap, with the calculator to run your own numbers.
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Concentration and diversification
Exchange funds: are they actually worth it?
Contribute appreciated stock to a pooled fund, receive a diversified basket, pay no tax on the swap: that is the exchange fund pitch. The structure works, but you pay with a seven-year hold, fee drag on the whole position, and a tax bill that is deferred, not erased. It earns its keep for a narrow profile: very low basis, very large position, no cash need for seven-plus years. For most equity holders, a scheduled sell-down wins. Here is the comparison the pitch leaves out.
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Hedging concentrated positions
Seven hedging mistakes that erase the protection you paid for
Hedging a single stock isn't free, even when it doesn't cost you anything in cash. A standard protective put costs about 3% a year, compounding to roughly a quarter of your position over a decade assuming the stock holds flat. A zero-cost collar drops that bill but trades away your gains above a chosen price: same downside protection, different cost shape. Seven recurring mistakes decide whether either actually works in practice. The calculator prices the protective put and the collar on your own position.
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Founder & employee stock
QSBS gives millions tax-free. Five ways to lose it anyway.
Qualified Small Business Stock (QSBS) is the most generous federal tax break in the equity-compensation tax code: hold the right stock for five years and the first $10-15 million of gain is federally tax-free. Five recurring mistakes decide whether you actually collect on it. The checker runs your eight qualification tests, the dollar cap, and the state-conformity math.
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Cashing out stock
Cashing out stock for a goal? Convert your risk tolerance into cash.
Selling vested stock for a house, tuition, or a sabbatical seems simple: sell enough to hit the number. But two people selling the same shares at the same price can keep very different amounts. We calculate whether the extra cash from waiting is worth the risk, then return the lowest-tax sell schedule to get there.
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Selling as an insider
10b5-1 plans for tech employees and Section 16 officers
Rule 10b5-1 lets you commit to a sell schedule while you are clean of material nonpublic information, then trade on autopilot, even through blackout windows. Since the December 2022 amendments the defense comes with real machinery: 30-to-120-day cooling-off periods, a no-overlap rule, officer certifications, and quarterly disclosure. The legal wrapper is the easy part. The schedule inside it, how many shares, which lots, which months, is a math problem you commit to in advance, so compute it before you sign.
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Equity compensation
Planning RSUs, ISOs, and NSOs together across tax years
When you hold all three grant types at once, the tax on each one depends on the others. This is the order of operations for sequencing restricted stock units, incentive stock options, and non-qualified options across multiple years, plus the free calculators for each piece.
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Calculators
Run the numbers on your own grant
Every article above pairs with a free calculator that takes your grant data and produces an answer. No signup.