What Is Equity Compensation?
Equity compensation is a form of non-cash pay where your employer grants you ownership in the company. Companies use it to attract top talent, retain employees, and align interests with shareholders.
Restricted Stock Units (RSUs)
Shares granted by your employer that vest over time (typically 3–4 years). Once vested, they’re taxed as ordinary income at the current market value and appear on your W-2.
Non-Qualified Stock Options (NQSOs / NSOs)
The right to purchase company stock at a predetermined strike price. The spread between strike price and market price is taxed as ordinary income upon exercise.
Incentive Stock Options (ISOs)
Offer potential long-term capital gains tax treatment but can trigger Alternative Minimum Tax (AMT).
Performance Share Units (PSUs)
Vesting depends on company performance metrics such as stock price, revenue, or EBITDA targets.
Key Challenges of Equity Compensation
Vesting schedules and “golden handcuffs”
Tax withholding surprises (many companies default to 22% federal withholding)
Concentration risk – too much of your net worth tied to one company stock
AMT implications for ISOs
Timing decisions around exercise, sale, and charitable giving
Year-end tax planning opportunities
Some of these issues could become especially evident during strong market periods or when approaching major liquidity events.
Listen To Our Experts Discuss Equity Compensation Strategies
In this episode of Wealthyist, Brian Jacobson (Chief Economic Strategist) and Tom Berkholtz break down equity compensation in practical terms — from RSUs and options to vesting, taxes, AMT, concentration risk, and year-end planning moves.
How Annex Wealth Management Helps with Equity Compensation
Our experienced team, which includes an Equity Compensation Associate (ECA) and expert financial planners, provides integrated strategies tailored to your total financial picture.
- Comprehensive modeling of vesting schedules, taxes, and cash flow
- Tax-efficient strategies for RSUs, NQSOs, and ISOs (including AMT planning and ISO exercise timing)
- NUA Strategy, where applicable
- Diversification strategies to reduce single-stock concentration risk
- Charitable giving optimization using appreciated equity shares and Donor-Advised Funds (DAFs)
- Year-end tax planning and estimated tax projections
- Coordination with your CPA and attorney for holistic planning
- Preparation for company exits, retirements, or major life transitions
Ready to harness the power of your equity compensation?
At Annex Wealth Management, we don’t just manage investments – we help you align complex compensation with your goals and plan.