Year-End Equity Tax Planning: 10 Moves to Make Before December 31

Equity compensation creates year-end tax decisions that ordinary salaried employees never face. Miss a December 31 deadline — an ISO exercise, an NQDC deferral election, a charitable gift — and there's no extension, no do-over. This checklist covers the moves that matter for tech employees with RSUs, ISOs, NSOs, ESPP, or pre-IPO equity.

Some of these have hard December 31 cutoffs. Others have January deadlines but require decisions now. All of them are worth reviewing before the holiday slowdown.

1. Model your ISO exercise window before December 31

ISO exercise is one of the few equity-comp moves with a hard calendar cutoff. The Alternative Minimum Tax is calculated per calendar year — if you're going to exercise ISOs this tax year, you must do it by December 31. The key question: how many ISOs can you exercise before the AMT spread triggers a tax bill larger than the option benefit?

For 2026, the AMT exemption is $90,100 for single filers, phasing out at $0.50 per dollar of AMTI above $500,000.¹ The "ISO spread" (FMV minus strike price at exercise) is an AMT preference item — it adds directly to your AMTI. A senior tech employee earning $300K base can often exercise a moderate ISO tranche without triggering additional AMT, but the math is specific to your income and other deductions.

Use our ISO AMT calculator to estimate how many options you can exercise before hitting AMT. If the calculation is close, an equity-comp advisor can run the full Form 6251 numbers with your actual inputs.

One more deadline: if you exercised ISOs earlier this year and paid AMT, you may have an AMT credit (Form 8801) building. This credit can be carried forward and applied against regular tax in future years when your regular liability exceeds your tentative minimum tax — worth tracking explicitly so it isn't left unclaimed.

2. Catch up on Q4 estimated tax (due January 15)

The fourth-quarter estimated tax payment covers October–December income and is due January 15 of next year. If you had unexpected vesting events — a company hitting a performance milestone, an acquisition closing, a tender offer — your withholding may not cover the full liability.

The safe harbor rule protects you from underpayment penalties if you pay either 90% of this year's actual tax or 110% of last year's tax liability (110% applies if last year's AGI exceeded $150K).² If your Q4 income is significantly higher than Q1–Q3, the January 15 catch-up payment may be necessary to stay within the safe harbor. See our RSU estimated tax guide for how to calculate the right amount.

3. Maximize 401(k) and mega backdoor Roth (deadline: December 31)

Unlike IRA contributions, which can be made until April 15, 401(k) deferrals must hit payroll by December 31. If you haven't reached the 2026 elective deferral limit of $24,500 (or $32,500 if you're 50+; $35,750 at ages 60–63 with the SECURE 2.0 super-catch-up),³ check whether you can increase your contribution rate for remaining pay periods.

If your plan allows after-tax 401(k) contributions, the mega backdoor Roth gives you an additional $47,500 of Roth-sheltered space (the difference between your elective deferral and the § 415(c) total limit of $72,000³). These after-tax contributions also must be made by December 31. See our mega backdoor Roth guide for the mechanics.

4. Make your NQDC deferral election for 2027 (deadline: December 31, 2026)

Non-qualified deferred compensation plans (NQDC/409A) require you to elect before the income is earned. For calendar-year employees, the election to defer 2027 salary, bonus, or commissions must be made by December 31, 2026.⁵ There is no exception, no extension, and the IRS treats late elections as a § 409A violation, triggering immediate income inclusion plus a 20% penalty tax.

If your company offers a deferred comp plan and you expect to be in a high marginal rate bracket this year but a meaningfully lower rate at distribution (retirement, departure, etc.), the deferral can be worth significant tax savings. See our NQDC guide for how to evaluate the decision.

5. Harvest capital losses to offset RSU and stock gains

Year-end is the natural time to review your portfolio for unrealized losses that can offset capital gains from RSU sales, ESPP dispositions, or ISO exercises. If you hold appreciated employer stock alongside other positions that have declined below cost basis, a tax-loss harvest can convert unrealized losses into capital loss deductions that offset gains dollar-for-dollar (short-term losses against short-term gains first, then long-term).

The wash-sale rule prevents you from claiming the loss if you buy "substantially identical" securities within 30 days before or after the sale. For employer stock, this typically means you cannot buy back the same company's shares for 31 days — but you can immediately reinvest in a different company's stock or a broad-market ETF.

6. Donate appreciated shares before December 31

If you hold RSU shares (or any stock) that you've owned for more than 12 months and that have appreciated above your vest-day cost basis, donating them directly to charity — or to a Donor-Advised Fund — is a double tax benefit: you eliminate the capital gains tax entirely and still deduct the full fair market value.

The donation must be completed by December 31 to count for this tax year. A DAF is the practical approach if your charities can't process stock gifts efficiently: contribute the appreciated shares to the DAF by December 31, take the deduction now, and distribute grants at your own pace. Our charitable giving guide covers the 2026 OBBBA changes, bunching strategy, and the math at different income levels.

7. Establish a 10b5-1 trading plan for 2027

If you're an executive, director, or 10%+ shareholder, selling company stock requires pre-planning under Rule 10b5-1. The plan must be adopted during an open trading window, when you have no material nonpublic information. Year-end — often an open window for many companies — is the right time to set up a 2027 plan so your first scheduled sale can happen as early as Q1.

Under the 2023 SEC amendments, single-trade plans carry a 90-day cooling-off period; executive plans have a longer 120-day gap before the first trade.⁶ Establish the plan now if you want Q1 liquidity. See our 10b5-1 guide for how to design one that balances tax efficiency with concentration reduction.

8. Check your QSBS holding period milestones

If you hold pre-IPO shares that qualify under IRC § 1202 (acquired from a C-corp with gross assets under $50M at issuance), the three-year, four-year, and five-year holding periods determine your federal exclusion: 50%, 75%, and 100% of the gain, up to $15M per issuer (post-OBBBA, permanent).⁷

Before participating in a year-end tender offer or secondary sale, check exactly where you stand on the holding period. Selling at year three might trigger 50% exclusion; waiting until year five gives you 100%. On a $3M gain, that difference is roughly $900K in federal tax savings. Our QSBS guide covers the post-OBBBA rules and the California trap (CA doesn't conform).

9. Confirm your 83(b) election records for any restricted stock received this year

If you received restricted stock (not RSUs) in 2026 and filed an 83(b) election, confirm your records: a copy of the election, the IRS receipt (email or return receipt), and the company's copy. Unlike RSUs, restricted stock with an 83(b) starts the LTCG and QSBS holding clocks at grant — but only if the election was properly filed within 30 days and proof exists.

If you received restricted stock in 2026 and did not file an 83(b), the clock cannot be restarted. Future vesting events will be ordinary income, and the QSBS holding period doesn't start until vesting. See our 83(b) election guide for the mechanics and Form 15620 electronic filing.

10. Review your concentrated stock position before year-end rebalancing

If your employer stock represents more than 20–25% of your net worth, year-end is a natural time to review the position and design a systematic sell-down for next year. A 10b5-1 plan, a gradual sell schedule, or a direct indexing strategy can reduce concentration over two to three years without triggering a single large tax event.

The decision to diversify intersects with everything else on this list: estimated tax on gains, loss harvesting to offset gains, charitable giving of appreciated shares, and the LTCG timing of shares you're holding. Our concentrated-stock guide and diversification calculator model the year-by-year tax cost of different sell schedules.

What an advisor models in a year-end planning session

The above checklist is a framework, but the decisions interact. ISO exercise quantity affects AMT, which affects estimated tax. RSU vesting income affects which LTCG bracket you're in. Loss harvesting affects taxable income, which affects AMT exposure. A fee-only equity-comp specialist runs the full picture in one model:

• Full-year tax projection combining W-2, RSU vests, ISO exercises, ESPP dispositions, and scheduled sales
• Optimal ISO exercise quantity specific to your AMT cushion and credit carryforward
• NQDC deferral analysis: expected marginal rate at deferral vs. distribution, net-present-value of the deferral benefit
• Charitable giving strategy: which lots to donate, when, and how to bundle with your giving goals
• 10b5-1 plan structure: size, cadence, and price triggers for 2027 that align with concentration targets

Most equity-comp-specialist advisors hold year-end planning reviews in October and November. If you want a session before December, schedule now — calendars fill up in Q4.