Equity-type planning inside a 10b5-1 plan

RSUs, stock options, and 10b5-1 plans: what changes by equity type.

Most executives holding $1M or more of employer stock have a mix: restricted stock units vesting on a schedule, non-qualified stock options with several years left before expiration, maybe incentive stock options from earlier in a career. Each type carries different tax treatment, different holding-period rules, and different planning mechanics inside a 10b5-1 plan. Understanding those differences changes how the plan is structured.

Restricted stock units (RSUs) in a 10b5-1 plan

RSUs are the most common form of equity compensation for public-company employees today. When RSUs vest, the company delivers shares and withholds taxes — typically at the supplemental federal withholding rate of 22% or 37%, plus state tax. The delivered shares have a cost basis equal to the fair market value at vest and a new holding period beginning on the vest date.¹

A 10b5-1 plan can cover shares already held and shares delivered in future RSU vesting events. Two common structures:

RSU sales generate long-term capital gain only on appreciation above the vest-date basis — and only if the shares were held at least a year after vest. In most cases, executives sell RSU shares quickly after vest to avoid further single-stock concentration, so the gain is usually short-term. The 2026 short-term rate equals ordinary income rates (10%–37%), plus 3.8% NIIT above $200,000 single / $250,000 MFJ.²

Non-qualified stock options (NQSOs) in a 10b5-1 plan

When an NQSO is exercised, the spread — fair market value minus exercise price — is ordinary income in the year of exercise, subject to withholding and FICA. The shares acquired have a basis equal to the FMV at exercise.¹

A 10b5-1 plan can include NQSO exercise instructions. Two approaches:

The tax model matters. An executive netting $400,000 in NQSO spread income in the same year as a bonus, RSU vest income, and a planned home sale is in a very different position from one for whom option income is the primary event of the year.

Incentive stock options (ISOs): usually excluded from plans

ISOs do not generate ordinary income at exercise for regular income tax purposes — but the spread at exercise is an AMT preference item.¹ For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married filing jointly, phasing out at $500,000 / $1,000,000 at a 50% rate — meaning a single filer at $680,000 in AMTI has fully lost the exemption.³

This creates a planning constraint: ISO exercises that generate large AMT bills must be sized carefully, typically to stay below the crossover where regular tax already exceeds tentative minimum tax. Because 10b5-1 plans commit to mechanical execution without later influence, including ISO exercises in a plan can produce unintended AMT bills in years where other income changes the crossover point.

If ISOs have been exercised and the qualifying disposition holding period is met (1 year from exercise, 2 years from grant), the gain on sale qualifies for long-term capital gains rates — 0%, 15%, or 20% in 2026 depending on taxable income, plus 3.8% NIIT above $200,000 / $250,000.² Those shares can be included in a 10b5-1 plan like any other long-term holding.

Performance stock units (PSUs) and other awards

PSUs vest based on performance metrics — revenue, TSR, EPS — over a measurement period, typically three years. Because the vesting amount is uncertain before the performance period ends, PSUs are harder to include in a fixed-instruction 10b5-1 plan. Two approaches used in practice:

• Post-vest inclusion: Once the PSU award settles and shares are delivered, treat them like RSU shares (already-vested stock with a new basis and holding period) and sell under an existing or new plan.
• Formula instruction on delivered shares: Some plans include a formula such as "sell X% of shares delivered under award Y on the delivery date." This works if the plan is structured with counsel to handle variable delivery amounts.

ESPP shares, founder stock, and merger consideration shares are less common but follow similar logic: the key questions are basis, holding period, and whether the shares are restricted by Rule 144, lock-up agreements, or issuer pre-clearance requirements.

Coordinating a mixed equity position

Most executives do not have one clean equity type — they have RSUs vesting quarterly, NQSOs expiring in two to four years, PSUs settling in year three, and maybe old ISOs already exercised and held. Planning considerations:

• Year-by-year tax stacking: RSU ordinary income, NQSO spread income, and capital gains from planned sales can compound in the same tax year. Advisors model the marginal rate on each layer, including NIIT, state tax, and estimated payment requirements.
• Which equity to sell first: High-basis RSU shares received recently versus low-basis options exercised years ago produce very different after-tax proceeds per dollar of FMV sold. The plan's lot-selection instructions affect the outcome.
• Concentration math: Future grants can rebuild concentration even as the plan sells old shares. A vest-and-sell overlay on new RSU grants combined with a periodic sale of legacy holdings can hold the employer-stock percentage roughly flat or declining.
• Expiration planning: NQSOs that are deep in the money and approaching expiration may need to be exercised regardless of the plan — counsel and the broker need to know the option expiration schedule.

What the advisor does before the plan is adopted

The advisor's job is to deliver a clean financial model to the counsel and broker who will draft and administer the plan. That model includes: projected equity deliveries by type and date over the next 24 to 36 months, a year-by-year tax estimate across scenarios, a target employer-stock percentage and the sale rate required to reach it, and lot-selection guidance. This preparation is what makes a plan useful rather than just compliant.

For the compliance requirements and timing rules, read the 10b5-1 plan rules and the cooling-off period guide. For plan structure options, see the 10b5-1 plan examples. Use the concentration calculator to model your after-tax proceeds and target sell-down amount.