Pre-IPO Equity Calculator

When your company files for an IPO, your double-trigger RSUs vest simultaneously — delivering a large block of ordinary income all at once. The company withholds at the 22% supplemental rate, but your real marginal tax rate on a $500K+ equity event is often 37% federal plus 9–13% state. This calculator shows you the gross value, the actual tax owed, the withholding gap you need to cover, and what you walk away with after the lockup period.

Why the IPO tax bill surprises most tech employees

When your company goes public, the equity event is enormous — but so is the tax bill. Here's why the math almost always shocks people who haven't run the numbers beforehand:

The 22% supplemental withholding gap

Your company is required to withhold taxes when your RSUs vest. For equity compensation (supplemental wages), the IRS mandates withholding at the 22% federal supplemental rate.¹ But if you earn $250K in salary plus $500K in RSU income, your total $750K in income is taxed at a marginal federal rate of 37% on the upper portion — plus state. The company's 22% withholding covers less than half your actual tax on the equity income.

The difference — sometimes $50,000 to $200,000 — is due in April. If you sold your shares at lockup expiry and spent the money, you may not have the cash when the tax bill arrives.

Double-trigger RSUs: the IPO cliff

Standard RSUs at public companies vest on a time schedule. Double-trigger RSUs, the norm at pre-IPO companies, require two conditions: (1) the standard time cliff, and (2) a liquidity event. Until the IPO, no shares deliver and no tax is owed. At the IPO, every tranche that has met the time condition vests simultaneously.

If you have 4 years of double-trigger grants outstanding and the company has been private for 3 years, you may receive 3 full years of equity income in a single tax year. This creates an "equity cliff" that pushes you into the highest brackets even before adding your base salary.

Sell at lockup expiry vs. hold for long-term capital gains

Once the lockup expires, you have a choice: sell immediately, or hold for 1 year past the vest date to convert future appreciation into long-term capital gains (LTCG) at 0%/15%/20% rates rather than ordinary income rates of up to 37%.²

RSU shares already vest at their FMV, so the initial delivery is always ordinary income — there's no escaping that tax. The capital gains decision only applies to appreciation after the vest date. If the stock rises from $20 at IPO to $28 one year later, the $8/share gain would be taxed at LTCG rates rather than ordinary income rates — saving potentially 20+ percentage points in combined federal + state tax on that appreciation.

But holding concentrated stock in your employer carries real risk. A 20% LTCG rate advantage means nothing if the stock drops 30%. Most equity-comp advisors recommend a staged sell strategy: sell enough to cover your April tax bill immediately at lockup expiry, then evaluate the remainder based on concentration risk and long-term conviction.

The California trap

California does not have a preferential long-term capital gains rate — all income, including capital gains, is taxed at ordinary income rates up to 13.3%. A California resident holding RSU shares for 1 year to capture federal LTCG treatment (20%) still owes 13.3% state tax on the appreciation. Compare that to a Texas or Washington resident who owes 0% state tax. This is one reason equity-heavy tech employees in California face materially higher lifetime tax costs on the same equity package.

California also taxes RSU income based on where you were a resident during the vesting period — even if you moved states. If you vested 40% of your RSUs while living in California and then moved to Washington before the IPO, California may still claim 40% of the RSU income as California-source income.

Estimated tax payments: your safety valve

If your total federal tax bill for the year (including equity income) exceeds $1,000, you generally owe quarterly estimated tax payments to avoid underpayment penalties.³ For a large IPO event, the timing matters:

• Safe harbor: Pay at least 100% of last year's tax liability (or 110% if last year's AGI exceeded $150,000) in estimated payments, and avoid penalties regardless of the final bill.
• Actual liability method: Pay 90% of your current-year actual liability by the fourth quarter deadline (January 15).
• For an IPO that closes in Q2, the Q2 estimated payment (June 15) is typically the first installment where you should account for the equity income.

An equity-comp advisor can model the exact quarterly payment schedule to maximize cash-on-hand during the lockup while avoiding penalties.