If you work in tech, a significant portion of your wealth may come from RSUs, stock options, or company equity rather than salary alone. While equity compensation can create meaningful opportunity, it also introduces tax complexity around vesting, selling decisions, and long-term planning.
With thoughtful planning, it may be possible to reduce tax exposure, improve coordination across accounts, and build a more cohesive long-term strategy.
Below are seven tax planning strategies often considered by tech professionals.
1. Optimize Asset Location
Where investments are held can influence overall tax efficiency. Coordinating which assets are placed in taxable accounts versus tax-advantaged accounts may reduce long-term tax drag.
For example, if planning to sell $1 million in company stock for a home down payment, reviewing asset placement ahead of time may reduce realized gains while preserving long-term growth assets in appropriate accounts.
Strategic asset location can improve after-tax outcomes when aligned with broader financial planning goals.
2. Incorporate Tax-Aware Investment Strategies
Selling appreciated stock can trigger capital gains tax. In 2025, long-term capital gains rates are generally 15% or 20% federally, plus a potential 3.8% Net Investment Income Tax (NIIT), and applicable state taxes.
For illustration:
If $1 million of stock is sold with $300,000 in long-term gains:
- Federal capital gains tax at 20% = $60,000
- NIIT at 3.8% = $11,400
- Total federal tax = $71,400
- State taxes may apply depending on residency
Tax-aware investment strategies, including loss-harvesting approaches, may help offset gains in certain situations. Excess capital losses can be carried forward under current tax law.
These strategies should be evaluated carefully based on individual risk tolerance and investment objectives.
3. Consider Real Estate Tax Advantages
Real estate may provide both income potential and tax planning opportunities. Examples include:
• Purchasing properties below market value due to needed updates • Adding rental units or ADUs that may qualify for depreciation • Evaluating eligibility for Real Estate Professional Status (subject to IRS qualification requirements, including 750+ hours annually and material participation standards)
Under certain circumstances, depreciation losses may offset other income, subject to passive activity loss rules and federal limitations.
Tax rules in this area are complex and should be reviewed with a qualified tax professional.
4. Evaluate the Mega Backdoor Roth 401(k)
If an employer plan allows after-tax contributions and in-plan Roth conversions (or in-service rollovers), individuals may contribute above the standard 401(k) deferral limit.
For 2025, the total 401(k) contribution limit (including employer contributions) is $70,000, subject to eligibility requirements.
This strategy may allow additional funds to grow in a Roth environment, potentially creating future tax-free withdrawals if IRS rules are satisfied.
Plan design and eligibility vary by employer.
5. Utilize 529 College Savings Plans Strategically
A 529 plan can be used for qualified education expenses and may offer state tax benefits depending on residency.
Pursuant to the SECURE 2.0 Act of 2022, beginning in 2024, certain unused 529 plan funds may be rolled into a Roth IRA for the beneficiary, subject to specific requirements.1
1 Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs) — Section: “Qualified Tuition Program Rollover to a Roth IRA.” Available at https://www.irs.gov/publications/p590a. Some of the specific requirements include:
- A $35,000 lifetime rollover limit
- Annual Roth IRA contribution limits
- A 15-year account age requirement
- Restrictions on recently contributed funds
This provision may provide additional long-term flexibility if education costs are lower than anticipated.
6. Time Roth Conversions Strategically
Roth conversions may be more tax-efficient during lower-income years, such as during job transitions, sabbaticals, or business startups.
For example, converting $30,000 from a traditional 401(k) or IRA to a Roth IRA during a lower-income year may result in reduced federal income tax depending on total taxable income and deductions.
Once converted, funds may grow tax-free, provided IRS holding requirements are met.
Each conversion increases taxable income in the year executed and should be evaluated in the context of marginal brackets, Medicare premiums, and state taxation.
7. Incorporate Charitable Giving into Tax Planning
Charitable strategies may reduce taxable income while supporting philanthropic goals. Common approaches include:
- Qualified Charitable Distributions (QCDs) – For individuals age 70½ or older, up to annual IRS limits, which may satisfy Required Minimum Distributions if applicable
- Donating appreciated securities – May avoid capital gains tax while potentially allowing a deduction for fair market value, subject to AGI limitations
- Charitable Remainder Trusts (CRTs) – May provide income while transferring appreciated assets
- Donor-Advised Funds (DAFs) – Allow upfront deductions with grants distributed over time
Eligibility and deductibility limits depend on individual tax circumstances.
Final Thoughts
Equity compensation can create significant opportunity, but without coordination, tax exposure and portfolio concentration risks may increase.
A structured planning process that evaluates retirement planning, investment strategy, tax coordination, cash flow, and estate considerations together may provide greater clarity and long-term alignment.
Because tax laws are subject to change and individual situations vary, these strategies should be reviewed with a qualified financial and tax professional.
This blog is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax-free withdrawals on taxable contributions. To qualify for the tax-free and penalty free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59.5 or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state’s 529 Plan. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor.
