RSUs, ESPPs, and stock options explained so you can actually use them.
A meaningful part of your compensation as a woman in tech does not show up as salary. It comes in the form of equity compensation: RSUs that vest on a schedule, ESPP enrollment windows that open periodically, and stock option grants with expiration dates that are easy to lose track of.
No one hands you a manual. Most companies leave the planning entirely up to you, and the tax consequences can catch people off guard. This guide covers how each type of equity works, what the tax implications are, and what strategies actually help you build wealth over time.
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RSUs: The Foundation of Your Equity Wealth
RSUs are shares of company stock your employer grants you as part of your compensation. They become yours when they vest. When that happens, the value is added to your paycheck as ordinary income and taxes are owed immediately.
Here is what most people miss: companies often withhold at a flat supplemental rate for federal taxes on RSU income. If you are a high earner, your actual marginal rate may be considerably higher. That gap is what creates the surprise tax bill in April. Setting aside an additional reserve when shares vest is one of the simplest things you can do to protect yourself.
💡 Key Concepts
Concentration risk is real. If a large portion of your net worth is sitting in your employer’s stock, that is worth paying attention to. You are already concentrated in your company through your salary, your career, and your bonus. Adding unchecked RSU holdings on top creates significant exposure to a single company.
Accumulating without a plan is the default. Decide in advance what your RSUs are working toward: an emergency fund, a Roth IRA, a down payment, or early flexibility, and sell intentionally toward that goal.
ESPPs: The Clever Money Machine
An ESPP lets you buy your company’s stock through payroll deductions at a discount. Many plans also include a lookback provision, which means the discount applies to whichever price is lower: the price at the start of the purchase period or the price at the end. That combination can create a built-in gain at the time of purchase, depending on plan terms and market conditions.
The discount is generally taxed as ordinary income when you sell, but the exact amount depends on whether the sale is a qualifying or disqualifying disposition.
Selling right away may offer a more predictable outcome. Holding longer could potentially benefit from additional appreciation if the company grows, but it also increases your concentration in company stock. Neither approach is wrong. The key is choosing deliberately.
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Know your plan’s specific rules. Discount percentage, lookback period, and holding requirements vary by company and affect your actual tax outcome.
Watch your concentration. If you are already holding RSUs in your company, adding ESPP shares on top can push your single-stock exposure higher than it should be.
Stock Options: Your Upside, If You Plan Well
Stock options give you the right to buy company stock at a set price called the strike price, even if the market price is higher. The value lives in that gap. There are two types: ISOs (Incentive Stock Options), which come with potential tax advantages but can trigger the Alternative Minimum Tax (AMT), and NQSOs (Non-Qualified Stock Options), which are taxed as ordinary income when you exercise them.
The AMT situation with ISOs surprises a lot of people. When you exercise ISOs, the IRS counts the difference between your strike price and the current market price as income for AMT purposes, even if you have not sold a single share. This can create a real tax bill on money you have not actually received in cash. Running a tax projection with a qualified advisor before you exercise is one of the best ways to understand whether AMT may apply.
💡 Key Concepts
Options expire. If you leave a company, your window to exercise is often 90 days for vested shares, and unvested shares are usually forfeited. Many people miss it entirely.
Keep a clear inventory. Strike prices, grant dates, vesting schedules, and expiration dates add up across multiple grants. Know what you have.
Tax Strategies Worth Knowing
Equity compensation introduces real tax complexity. Not all of these strategies might apply to your situation, but knowing they exist means you can ask the right questions.
Time your sales thoughtfully. Selling RSU shares increases your taxable income in the year you sell, if your shares have increased in value. Years with lower income, such as parental leave, a job transition, or a sabbatical, can be strategic windows to sell at a lower effective rate.
Short-term vs. long-term capital gains. Shares held for less than a year are taxed as ordinary income. Shares held for more than a year qualify for long-term capital gains rates, which are generally lower than ordinary income rates. The clock starts on the day RSUs vest, not the day they were granted.
Backdoor Roth and Mega Backdoor Roth. If your income is too high for a direct Roth IRA contribution, the backdoor Roth is a legal workaround worth understanding. Some 401(k) plans also allow after-tax contributions that can be converted to Roth accounts. Plan rules vary, so check your specific documents.
Plan around career transitions. Promotions, job changes, and equity events create planning windows most people miss. These moments change your income, your equity picture, and your tax situation all at once, which makes them exactly the right time to revisit your plan. Our financial planning services are built around exactly these moments.
Free Resource
Get the Full Playbook as a PDF
Everything in this guide plus action plans for RSUs, ESPPs, and stock options in one clean, downloadable resource.
Ready to build a plan around your equity?
I help women in tech build a clear, confident plan around their equity compensation.
Founder of Valoria Wealth Management. Maria specializes in financial planning for high-earning women in tech with equity compensation, with a focus on building long-term wealth, optimizing their tax situation, and creating more financial freedom in their lives.
This content is for informational and educational purposes only and is not intended as individualized financial, investment, or tax advice. Past performance is not indicative of future results. Any opinions expressed are as of the date of publication and may change. Please consult your financial advisor or tax professional regarding your specific situation before making financial decisions.
