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Both involve selling shares around , but they differ in scope. sells just enough shares to fund and leaves you holding the rest. A generally sells all the vested shares right away, leaving you with cash instead of stock. Tax at is the same either way.
Why this happens
The creates wage income regardless of which method is used.
targets only the amount, so you keep net shares.
A liquidates the full , converting it to cash near the price.
Because both sell near the price, or loss on the sold shares is usually small.
What to check
- Which method your plan uses by default and whether you can change it.
- How many shares you end up holding under each option.
- Your concentration in company stock.
- How each method's sales appear on your .
- Whether either method changes your outcome (usually not the tax itself).
Common mistake
Thinking one method changes the tax owed at . It does not. The choice is about how many shares you keep and how much market exposure you take, not about avoiding the tax.
Example scenario (hypothetical)
Illustration only, not your tax situation.
Example: Lee vests 100 shares at $40. Under , the plan sells ~30 and Lee keeps 70 shares. Under a , all 100 are sold and Lee receives cash near $4,000 minus taxes. The $4,000 wage income at is the same in both cases.
When to get help from a tax pro
- You want to reduce concentration in company stock.
- You face trading restrictions.
- You are deciding how much equity exposure to keep.
- You are unsure how sales are reported for either method.
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For learning, not filing
Grants, employers, and states all differ. Use your own documents and a qualified tax professional before you make decisions from this guide.