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Your equity is about to become real money. Are you ready?

SpaceX. Anthropic. OpenAI. The IPO conversation is louder right now than it’s been in years. If you hold equity at any of these companies, the next few months could be the most financially consequential of your career, not just because of what your equity could be worth, but also because of how much of it you stand to lose to taxes, timing mistakes, and concentration risk if you don't plan.

These high stakes don’t just apply to trillion-dollar unicorns. They play out at late-stage startups, in acquisitions, and in annual tender offers. If your company is approaching a liquidity event — or if you’ve been accumulating equity for years and haven’t thought much about what happens next — it’s time to set up an equity strategy.

By the time most people start thinking about the tax impact of their equity, the best planning options have already closed. explains how to get ahead of it.

Two Scenarios That Catch People Off Guard

1. A tax bill on money you haven’t seen yet

Imagine you've just exercised your right before your company's IPO. This can be a smart move, as one key reason to exercise is to start the clock towards preferential tax treatment. If you hold those ISOs one year from exercise and two years from the grant date, any gains qualify for lower long-term capital gains rates instead of ordinary income rates. ISOs are typically among the best deals in the tax code.

But here's the catch: Exercising ISOs can trigger the Alternative Minimum Tax (AMT), in which case the IRS would treat the spread between your exercise price and the stock's fair market value at exercise as taxable income. An exercise of ISOs with a significant spread creates a tax on income you haven’t even received yet.

The result: a potentially six- or seven-figure tax bill, due in April following the year you exercise, regardless of whether you actually sell any shares. This is made worse if the shares are still locked up in stock you can’t sell for six months post-IPO.

This is the ISO/AMT trap — one of the most common ways equity events turn from windfalls into financial stress.

before you exercise can help you find the sweet spot between cashing in on your equity and owing a massive tax bill.

2. Three years of income, one day on your W-2

Many startup employees are sitting on RSUs that have been vesting for years — without triggering any income. With double-trigger RSUs, a common type of equity in pre-IPO startups, the shares don’t settle, and you don’t owe taxes, until a liquidity event occurs. The moment the company goes public, everything vests at once.

For employees at companies like Anthropic, that can mean years of accumulated RSU value landing on your W-2 in a single tax year. Standard withholding typically falls around 22%. In most cases, especially if you live in a state like California or New York or are in a high-tax bracket, taxes withheld from your RSUs likely won’t cover the full bill.

You’ll need to keep cash on hand to cover the remainder of your tax bill — and make quarterly estimated tax payments throughout the year to avoid underpayment penalties.

Equity Planning

The cost of getting these decisions wrong is in the six- or seven-figure range. The window to get them right is before the event—not after. Here's how to navigate a liquidity event.

• Build the full picture of what you own. ISOs, NSOs, RSUs — the strategy for each is completely different. Vesting terms are also changing at many companies: OpenAI eliminated its vesting cliff in late 2025, DataBricks removed the double trigger on RSUs in late 2024, and other AI companies are making similar moves. If you haven’t reviewed your grant agreements recently, the terms may not be what you think.
• Model the tax before you exercise. For ISO holders, there’s often a “sweet spot” — a number of shares you can exercise without triggering AMT. Range advisors help our members model the right amount to exercise each year to avoid AMT.
• Set up a selling sequencing strategy for ISOs and NSOs. : Exercise NSOs immediately in a cashless exercise; hold ISOs until they qualify for long-term capital gains treatment. The cash proceeds from a cashless NSO exercise during a tender can fund your ISO exercises, allowing you to acquire and hold ISO shares for long-term capital gains treatment without paying out of pocket.
• Turn AMT from a trap into a tool. If you've already triggered AMT in a prior year, you have a credit that can be recovered, but only if your regular tax exceeds your AMT in a future year. Since AMT tops out at 28% and regular rates reach 37%, your advisory team may recommend deliberately accelerating income to recapture that credit sooner. It's counterintuitive, but one of the highest-value planning moves to make.
• Build a selling plan before the IPO. The hardest part of diversifying out of concentrated equity is often the emotional pull of holding stock in a company you believe in. A rule-based selling schedule, built before the stock is publicly traded, takes emotion out of the equation.

The Time to Set Out an Equity Strategy Is Now

All these strategies have one thing in common: They work best when you set a plan before a liquidity event. AMT modeling only helps if you haven’t already exercised. A withholding gap analysis only prevents penalties if you act before taxes are due. A diversification plan only removes emotion if you’ve committed to a framework before the stock is publicly traded.

Whether you’re a SpaceX employee preparing to diversify around a historic IPO, an Anthropic employee staring down years of double-trigger RSUs, a Stripe employee evaluating your next tender, or a startup employee who’s been quietly accumulating equity for years — the planning that actually changes outcomes happens before the event, not after.

The best time to start planning was six months ago. The second-best time is today.

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