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Equity taxes for employees near an IPO

IPO year can mix private option exercises with new RSU vests — separate the tax events clearly.

Rates and rules change. Content is reviewed for tax year 2026. Check the last-reviewed date and methodology on each page, then confirm against IRS or state guidance before you file.

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In plain terms

An IPO year often mixes two different tax stories: private option exercises (which can create or ) and newly liquid (wages at ). Keeping the two events separate is the key to not double-counting or getting surprised.

How the tax works

Pre-IPO option exercises can trigger () or () before shares are liquid.

that settle at or after IPO are wage income when they .

Lockups can delay selling even once shares are public, separating tax from cash again.

Several events can land in one year, making the reporting feel tangled.

What to check on your end

  • Which of your equity is options vs. , and their terms.
  • Whether pre-IPO exercises created income or .
  • settlement timing relative to the IPO.
  • Lockup periods affecting when you can sell.
  • Basis records for every lot you may sell.

Common mistake

Blending option-exercise income and income into one mental bucket. They are taxed at different times and in different ways, and conflating them leads to reporting errors.

Example scenario (hypothetical)

Illustration only, not your tax situation.

Example: an employee exercised options before the IPO (creating a spread that year) and also has that at listing. The two are separate tax events, and a lockup may delay selling either, so cash planning matters.

When a CPA is worth it

  • You exercised options before the IPO.
  • You have both options and near listing.
  • A lockup affects your ability to sell.
  • You may owe from a pre-IPO exercise.

Sources and notes

Primary tax claims on this page are supported by the official and secondary sources below. Broker and software links describe reporting mechanics — confirm rules against IRS or state guidance.

Employee equity tax planning context — not role-specific tax law.

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For learning, not filing

VestingTax.com is not a CPA firm or tax preparer. Grants, employers, and states all differ. Use the cited IRS and state sources above, your own documents, and a qualified tax professional before you make decisions from this guide.

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