7 costly equity compensation tax traps, and how to avoid them

David Jackson for Domain Money

7 costly equity compensation tax traps, and how to avoid them

Equity compensation taxes often surprise tech professionals because company withholding rarely covers the full bill. Restricted stock units (RSUs) are taxed as income at vesting ( not sale ), incentive stock options (ISOs) can trigger alternative minimum tax (AMT), employee stock purchase plan (ESPP) shares lose benefits if sold too soon, and moving states midvesting can create unexpected liabilities. To avoid traps, Domain Money recommends calculating your true tax rate, selling systematically to cover obligations, and coordinating with a certified financial planner and tax professional to manage timing, diversification, and cash flow.

Key Takeaways for Equity Tax Optimization

RSU vesting