Your equity compensation is part of your financial plan. I help you understand vesting schedules, employer-stock exposure, and the cash needs behind exercise and sale decisions. We can identify the tax questions to review with your tax professional before you act.
Understand your grant
Restricted stock units represent a promise to deliver shares or cash when the conditions in your grant are met. Review your award agreement for the vesting schedule, settlement terms, and what happens if you leave your employer.
For illustration, a $600,000 grant valued at $100 per share represents 6,000 RSUs. If 25% vest after one year, that first portion is 1,500 units. Grant valuation methods and vesting schedules vary by employer. This example is hypothetical.
Plan for withholding and taxes
For a typical RSU award that settles in shares when it vests, the share value at settlement is generally treated as wage income. Special rules and deferred settlement arrangements can change the timing. Withholding is a prepayment, not your final tax bill. Ask your tax professional whether additional withholding or estimated payments are needed during the year.
For California employees subject to State Disability Insurance, the 2026 SDI withholding rate is 1.3%, with no taxable wage limit. Other payroll taxes and withholding depend on the applicable rules and your circumstances.
Understand how withholding is funded
With net share withholding, the company retains some shares to cover withholding. With sell-to-cover, shares are sold to fund withholding. Your plan determines the available methods and when the remaining shares or cash reach your account.
Connect your shares to your goals
Before deciding whether to hold or sell, consider cash needs, trading restrictions, and how much of your financial future already depends on your employer.
Updated September 24, 2026. Sources: California EDD, Rates and Withholding; IRS Publication 525.
Employee stock options give you the right to buy shares at a stated exercise price during a specified period. Your grant agreement controls vesting, expiration, and any deadline after leaving your employer.
For example, exercising 2,500 options at $2 per share requires $5,000 before taxes and fees. The shares may be difficult to sell, particularly at a private company, so consider liquidity as well as potential value. This example is hypothetical.
Nonqualified stock options (NSOs) generally create ordinary income on exercise based on the difference between the share value and exercise price. Incentive stock options (ISOs) generally do not create regular federal income tax at exercise, but alternative minimum tax may apply. Later sale treatment depends on the option type and holding periods.
The tax basis used to calculate a later gain or loss can differ by option type and tax treatment. Review your grant documents and tax forms with your tax professional rather than assuming one calculation applies to every option.
Before exercising, review the cash required, possible taxes, sale restrictions, expiration dates, and employer-stock concentration. I can help you evaluate how those decisions fit your financial plan.
Updated September 24, 2026. Sources: IRS Topic 427, Stock Options; IRS Publication 525.
¹ Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied on for the purpose of avoiding any tax penalties. You should discuss any tax or legal matters with the appropriate professional.
McW Wealth Management offers securities through International Assets Advisory, LLC (“IAA”) – Member FINRA/SIPC. Advisory services offered through International Assets Investment Management, LLC (“IAIM”) –SEC Registered Investment Advisor. McW Wealth Management is unaffiliated with IAA and IAIM.
McW Wealth Management may only conduct business with residents of the states for which they are properly registered, therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. This site and the content herein are subject to certain Legal Notices.
¹ Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied on for the purpose of avoiding any tax penalties. You should discuss any tax or legal matters with the appropriate professional.
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