As the year winds down, many tech professionals start thinking about how their equity will affect their tax bill. A December RSU vest or option exercise does not always feel like a big event on the surface, but it can change your tax bracket, increase withholding needs, or reduce deductions you were counting on. The timing matters more than most people expect.
The good news is that you often have more room to shape your tax year than you realize. With some types of equity, such as RSUs, the timing is mostly set for you. With others, like stock options, you have the option of choosing whether income shows up this year or deferring income to next year. The goal is not to jump through hoops or make perfect predictions. It is simple to understand which levers are available so you can be intentional with the choices you do have.
At KB Financial Advisors, we help tech employees and founders plan ahead so equity income lands in the most efficient year. Below is a simple and friendly guide to how RSU and option timing work, when deferring income can help, and what to look out for.
Why Equity Timing Matters
Most people earn a salary on a predictable schedule. Equity does not work that way. It arrives in chunks and often at moments you are not fully ready for. Since the tax system works on the calendar year, even a small shift in timing can change how much tax you owe.
RSUs are taxed as income on the day they vest. You are taxed at vesting even if you never receive cash. That value is treated as wage income for that specific year. If that vest happens on December 20 instead of January 2, it belongs to a different tax year entirely.
Nonqualified stock options (NSOs) follow a similar idea. When you exercise, the difference between the strike price and the fair market value becomes ordinary income in that year. A December exercise and a January exercise can create the exact same income but produce very different tax outcomes.
Incentive stock options (ISOs) work slightly differently. They are not taxed at exercise under regular rules, but the spread can show up under the Alternative Minimum Tax (AMT) in the year you exercise. That means ISO timing affects both your regular tax and your AMT exposure.
When you know how each type of equity fits into the calendar year, the idea of deferring income starts to make more sense. You are not trying to avoid tax. You are trying to place the income in a year where it fits the rest of your financial picture.
How RSU Timing Works
RSUs are the simplest to understand but the hardest to control. Once they vest, that value becomes wage income in that year, even if you do not receive cash and even if some shares are withheld for taxes. For most public company plans, the schedule is fixed. If your RSUs vest on the fifteenth of each month, they will continue vesting on that date no matter what is happening in your tax life.
There are two ways RSU timing might still give you choices.
The first is when your company offers a deferred settlement program. These plans allow you to elect, in advance, to receive shares at a later date. If the plan meets specific rules, the income is taxed when the shares are eventually settled, not at vest. These programs are more common at senior levels and must be elected ahead of time, often a full year before the vest. They are not a last-minute strategy, but for people who have access to them, they can spread out very large vesting over several tax years.
The second involves double-trigger RSUs at private companies. These grants require both a time-based vest and a liquidity event, such as an IPO or acquisition. Even after both triggers are met, the actual delivery of shares may depend on the company’s plan. In certain situations, settlement timing can fall near year-end or be spread across years, although the company has more control here than the employee. If you are approaching a major liquidity event, it is worth understanding how your grant works so you know which year the income will land in.
Outside of those situations, RSUs generally follow the schedule the company sets. You cannot defer a December vest into January simply by choosing not to sell. Once the shares are in your account and available to you, the IRS treats them as income in that year, whether you sell immediately or hold the shares for decades.
How Option Timing Works
Stock options are where most people gain real flexibility. Unlike RSUs, you can choose when to exercise, within the limits of your plan and blackout windows. That choice determines which tax year the income belongs to.
Nonqualified Stock Options (NSOs)
For NSOs, the spread at exercise becomes ordinary income. If exercising in December would push you into a higher tax bracket or reduce deductions you rely on, waiting until January might give you a cleaner outcome. The reverse is also true. If next year’s income will be higher because of a promotion, IPO, or bonus, capturing NSO income this year could make more sense.
Incentive Stock Options (ISOs)
With ISOs, the decision is more nuanced. Exercising does not create ordinary income immediately, but the spread can count under the alternative minimum tax. Planning an ISO exercise across multiple years often gives you a better balance of regular tax, AMT exposure, and investment risk. Many people set a target amount of ISO exercises per year to stay within a manageable AMT range rather than doing everything at once.
The advantage of options is that you can usually choose the month or year of exercise. The tradeoff is that your decision needs to consider stock price movements, your other income, and any major financial changes on the horizon.
Learn more about how Alternative Minimum Tax works on ISOs or use our free AMT calculator.
Looking Beyond This Year
Deferring income is not automatically the best move. It only works when next year looks more favorable than this year. Before shifting anything into January, it helps to look ahead at what next year brings. Will you have larger RSU vests, a significant bonus, or a liquidity event? Are there tax law changes approaching? Will your income be higher or lower? These questions shape whether deferring income helps or hurts.
The upcoming changes in 2026 under the One Beautiful Bill Act make this especially important for tech professionals. The rules for deductions, brackets, and charitable strategies will shift. That means the choice between recognizing income in 2025 or 2026 should be made with a multi-year lens, not just a short-term one.
Tax planning for equity is really about understanding how all the pieces interact. RSUs, NSOs, ISOs, salary, bonuses, secondary sales, partner income, and withholding levels all fit together. When you look at everything as a whole, the right timing choice becomes much clearer.
Plan Your Equity Timing With Confidence
Equity can be one of the biggest wealth drivers in your career, but it comes with complex timing decisions. Some of your income will always follow the company’s schedule, especially with RSUs. At the same time, options often give you meaningful control over when income appears.
The goal is not to chase perfection. It is to map out the years ahead so your equity income lands where it makes the most sense. When you make these decisions proactively instead of at the last minute, the tax savings and peace of mind can be significant.
At KB Financial Advisors, we guide tech professionals and founders through these decisions every day. We model different timing scenarios, explain how each one affects your taxes, and help you shape a plan that fits both your goals and your equity.
If you are approaching a vest, thinking about exercising options, or preparing for a big income year, now is the right time to get clarity.
Book a discovery call to design an equity timing strategy that gives you confidence.
