Understanding Tech Equity Compensation: A Deep Dive into Its Many Flavors - Part 2

AMT often sneaks up on employees who exercise ISOs

The AMT Trap: Why My Dad Got Hit

AMT often sneaks up on employees who exercise ISOs because:

• Regular tax doesn’t recognize income at exercise, but AMT does.

If the company’s fair market value has risen significantly, even exercising without selling can create substantial AMT liability.

This is why:

• Timing matters

• Quantity matters

• And projections matter a lot

Tech Equity Compensation Is Powerful But Only If Tracked Well

Most tech employees accumulate:

• Multiple RSU grants

• ESPP purchases every six months

• ISOs and NSOs from promotions or startup transitions

• Occasional PSUs tied to company performance

Each comes with:

• Different vesting dates

• Different tax rules

• Different holding period requirements

• Different strategic opportunities

This makes tech equity compensation not just a benefit, but a tracking exercise and one with real financial upside if done well.

You can strategically:

• Hold for long-term gains

• Sell to diversify or meet goals

• Donate appreciated stock for charitable and tax benefits

• Exercise options gradually to manage AMT

• Use specific identification to minimize capital gains

The key is being intentional.

Why Having Guidance Matters

Tech equity compensation holds enormous upside, but only when planned thoughtfully. The wrong move a missed 83(b), an unexpected AMT trigger, or selling the wrong tax lot can cost thousands of dollars.

With experience from both sides of the equation from corporate tax administration and personal participation in equity plans, I understand both the mechanics and the real-world impacts.

Whether you’re negotiating an offer, preparing for a vesting milestone, or deciding when to exercise, the right strategy helps you:

• Avoid tax surprises

• Maximize long-term value

• Manage risk

• Stay aligned with your financial goals

If you want help making sense of your equity compensation or crafting a personalized plan, I’m here to support you with clarity and experience.

Interested in learning more?

Download our employee equity compensation checklist

Download our decision tree 

Meliora Consulting PLLC | tax advisory