TwoTen Planning FAQ's

RSUs (Restricted Stock Units) are taxed as ordinary income at the time of vesting, based on the fair market value of the shares on the vesting date. The standard federal tax withholding rate is 22%, and the default setting is usually “Sell to cover,” which means approximately 22% of shares will be sold to cover tax and the remainder of shares are deposited into your account.

After vesting, additional gains or losses are taxed as capital gains. You must hold the shares for at least one year to qualify for long-term capital gains. Key strategies to reduce the tax burden include timing the sale of vested shares strategically, pairing RSU income with tax deductions, contributing to pre-tax retirement accounts to offset income, and considering tax-loss harvesting in taxable accounts. An advisor who specializes in equity compensation can model out scenarios before each vesting event to minimize the overall tax impact.

ISOs (Incentive Stock Options) and NQSOs (Non-Qualified Stock Options) are both forms of stock option compensation, but they're taxed very differently. The key decisions around both types of stock options involve timing of exercise, holding periods, AMT exposure, and concentration risk.

NQSOs are taxed as ordinary income at the time of exercise, based on the spread between the grant price and the fair market price. ISOs are not taxed at exercise under regular income tax rules, but the spread can trigger the Alternative Minimum Tax (AMT).

When you sell ISO shares, gains may qualify for long-term capital gains rates if you meet certain holding period requirements. You need to hold the shares for at least two years from the grant date and one year from the exercise date.

The mega backdoor Roth is a strategy that allows high earners who are typically phased out of direct Roth IRA contributions to get significantly more money into a Roth account. It involves making after-tax contributions to a 401(k) beyond the standard pre-tax limit, then making an in-plan conversion to a Roth 401(k).

In 2026, this can allow total contributions (employee plus employer) of up to $72,000 in a 401(k) for individuals under age 50. For a professional who expects high income in retirement, having tax-free Roth funds provides valuable flexibility.

Not every 401(k) plan supports this strategy, so the first step is confirming your plan allows in-plan Roth conversions or after-tax in-service withdrawals. TwoTen Planning evaluates this strategy for eligible clients.

Concentration risk occurs when a large portion of your net worth is tied to a single company's stock, typically your employer. The risk is real: if the company's stock drops significantly, so does your net worth, often at the same time your job security may be in question.

The challenge is that selling often triggers capital gains taxes, which can feel like a penalty for diversifying. Effective strategies include selling shares systematically over multiple tax years to spread the gain, pairing sales with tax-loss harvesting in other areas, donating appreciated shares to charity or a donor-advised fund, and using equity comp planning to naturally diversify over time.

TwoTen Planning helps clients develop a documented strategy that balances tax efficiency with the risk of staying too concentrated.

An Employee Stock Purchase Plan (ESPP) allows employees to buy company stock at a discount, typically 15% below the market price, often using after-tax payroll deductions over a contribution period.

Most people treat this as a no-brainer, but the tax treatment is more nuanced than it appears and depends on whether the sale is a qualifying or disqualifying disposition.

Alternative Minimum Tax is a parallel tax system designed to ensure that high earners pay a minimum amount of federal tax regardless of deductions and credits. For tech professionals, the most common AMT trigger is exercising Incentive Stock Options (ISOs).

The spread between the grant price and the market price at exercise is not taxable under regular income tax rules, but it is an AMT preference item.

In a year with a large ISO exercise, you could owe significant AMT even if you haven't sold any shares. The risk is greatest when you exercise ISOs and the stock later drops in value, leaving you with a tax bill larger than the remaining value of the shares. Careful modeling of ISO exercises can significantly reduce or eliminate AMT exposure.

TwoTen Planning runs AMT projections as a standard part of equity comp planning.

A Nonqualified Deferred Compensation plan allows highly paid employees to defer a portion of their salary or bonus to a future date, potentially deferring income tax until the money is received (usually in retirement).

This can be a powerful strategy for a tech professional in a peak earning year who expects to be in a lower tax bracket at the time of distribution.

However, NQDC plans carry meaningful risk: unlike a 401(k), the deferred funds are not protected from company creditors. If the company goes bankrupt, you could lose everything deferred. Participation decisions also require irrevocable elections made before the compensation is earned, which means careful planning around payout schedules, distribution triggers, and tax timing is essential.

TwoTen Planning evaluates NQDC participation as part of comprehensive equity compensation planning.

An IPO is one of the most financially significant events in a tech employee's career, and it requires decisions across several fronts simultaneously. Tax planning around the IPO is critical because large vesting events and stock sales can push you into the highest federal brackets.

Before the IPO, if you hold ISOs or early-exercise options, it may make sense to exercise shares to start the capital gains holding period clock, but this requires careful AMT analysis.

At IPO, lock-up periods typically prevent insiders from selling for up to180 days, during which the stock can be highly volatile. After the lock-up expires, having a pre-committed plan allows you to sell systematically to create liquidity, reduce concentration risk, and fund your goals.

TwoTen Planning helps clients map out a complete IPO financial plan well in advance of the liquidity event.

What happens to your equity when you leave a company depends entirely on the type of equity and the terms of your grant agreement. RSUs that are unvested are typically forfeited immediately upon departure, with no compensation for unvested shares.

For stock options, you usually have a limited post-termination exercise window, often 90 days for NQSOs and ISOs, though some companies offer longer windows. Missing the exercise deadline means the options expire worthless, regardless of how much value they have.

Before accepting a layoff package or resigning, it's worth understanding exactly what equity you're leaving on the table and whether the timing of your departure can be optimized. TwoTen Planning reviews equity grant agreements as part of financial planning and can help you think through these decisions before they become irreversible.

A donor-advised fund is a charitable giving account that allows you to make an irrevocable contribution of cash or assets, receive an immediate tax deduction, and then distribute grants to charities of your choice over time.

For tech professionals with concentrated stock positions, donating appreciated shares directly to a DAF is one of the most tax-efficient strategies available. You avoid capital gains tax on the appreciated shares and get a full fair market value deduction up to 30% of your adjusted gross income. In addition, the cash you would have otherwise donated is now still liquid and available for other purposes.

This strategy is especially powerful in a high-income year, such as a year when a large RSU grant vests or you exercise stock options, because the deduction can offset the spike in income. You don't have to decide which charities to support immediately; the money sits in the DAF and can be granted out over many years. TwoTen Planning incorporates DAF planning as part of tax strategy for clients with appreciated equity.

A 10b5-1 plan is a pre-scheduled stock trading plan that allows corporate insiders, employees with access to material non-public information, to sell company shares on a predetermined schedule without violating insider trading rules.

Under the plan, you set the sale parameters (price, volume, timing) while you are not in possession of inside information, and the broker executes the trades automatically going forward. This is valuable for senior employees who are subject to blackout periods or who receive regular RSU vesting events, as it removes the need to time sales around trading windows and provides a legal safe harbor.

Many people in their 40s or 50s assume estate planning is something to deal with "later," but for a tech professional with a family, $1M+ in assets, and high income, the risks of not having a plan in place are real.

At minimum, you would be wise to consider having a will, durable power of attorney, healthcare directive, and beneficiary designations reviewed and updated on all accounts.

TwoTen Planning performs an estate planning analysis as part of its ongoing service, but we do not provide legal advice or prepare estate documents. We can help you coordinate with an estate planning attorney when documents need to be drafted or updated.