Tax coordination for plan holders

Year-end tax planning when you have a 10b5-1 plan running.

A 10b5-1 plan runs mechanically — the broker executes on the schedule you set. But the tax consequences land in your year-end return like any other capital event. For executives with large employer-stock positions, Q4 is when a $200,000 tax difference is made or missed: coordinating the plan's scheduled gains with income stacking, retirement contributions, loss harvesting, and charitable strategies. This guide covers each lever.

Step 1: Know what your plan will do in Q4

The first task in any year-end review is pulling the actual trade schedule from your broker and reading it against a projected income statement for the year. Questions to answer by October:

• What dollar amount or share quantity is scheduled to sell in Q4?
• What are the lot selections — which shares, what basis, what holding period?
• Are any Q4 trades crossing the December 31 year-end boundary? A plan that sells on a fixed calendar date (say, the 20th of each month) produces December gains; one that sells on the last business day of each month could execute on December 31 or January 2 depending on the trading calendar.
• Do any trades fall in open windows — or does the plan govern regardless?

This calendar clarity is the foundation. Everything else is sequenced on top of it. If your plan does not have a clear Q4 trade calendar, request it from your plan administrator or broker before November 1.

The stacking problem: why Q4 is high-risk

Most executive compensation is back-loaded into Q4. A typical picture for a senior officer:

The 2026 LTCG rate brackets are stacked on top of ordinary income. An executive with $600,000 of salary, bonus, and RSU income is already well into the 20% LTCG bracket ($545,500 single / $613,700 MFJ) before the first plan sale shows up.¹ Add 3.8% NIIT above $200,000 single / $250,000 MFJ and the marginal rate on capital gains hits 23.8%.²

LTCG rate management

The marginal rate on capital gains is not a fixed number — it depends on how much ordinary income pushes total income toward the 20% LTCG bracket. Two questions worth modeling by October:

1. Is any Q4 bonus timing flexible? A December bonus that crosses the year-end boundary and lands in January is ordinary income in the next tax year — potentially in a year when the plan schedule is lighter. Some executives have flexibility; most do not. Ask the question anyway.
2. Can lot selection shift any Q4 plan sales toward higher-basis shares? If the plan specifies lot selection by rule (e.g., FIFO, specific identification), and the broker has the authority to follow specific-identification instructions, selling higher-basis lots first reduces the recognized gain without changing the number of shares sold.

On the concentration side: use the concentration calculator to model how your scheduled sales interact with your overall income picture and what the after-tax proceeds look like at different income levels.

Capital loss harvesting

Gains from 10b5-1 plan sales can be offset dollar-for-dollar by capital losses realized elsewhere in the same tax year. For executives with diversified investment portfolios outside the employer-stock position, Q4 is a natural time to review for embedded losses.

• What qualifies: Realized losses on any capital asset — publicly traded securities, real estate at a loss, closed-out partnerships, cryptocurrency — offset capital gains first, then up to $3,000 of ordinary income per year, with the remainder carried forward.
• Wash-sale rule: You cannot sell a security at a loss and repurchase substantially identical securities within 30 days before or after the sale (IRC § 1091). The rule applies to the specific security sold; buying a different fund in the same sector generally does not trigger it. Employer stock in the 10b5-1 plan is not affected — plan sales are not initiated by the taxpayer for wash-sale purposes, but repurchasing employer shares you sold through the plan within 30 days is a common trap.³
• Sizing the offset: If you have $1.5M of expected LTCG from the plan, $100,000 of harvested losses offsets the gain and saves approximately $23,800 in federal tax at the combined 23.8% marginal rate. At meaningful position sizes, this math is worth running systematically.

Retirement account contributions

Contributions to pre-tax accounts reduce AGI — which in turn reduces taxable income, NIIT exposure, and in some cases IRMAA lookback (see below). Year-end maximums for 2026:

Charitable strategies with appreciated employer stock

Donating appreciated employer stock directly to a charity or donor-advised fund (DAF) is one of the highest-efficiency tax moves available to executives with large embedded gains. The mechanics:

• No capital gain recognized. When you donate appreciated shares held more than one year, you do not recognize the embedded gain. The donation eliminates the tax on that gain entirely, not just defers it.
• Full fair-market-value deduction. You receive a charitable deduction equal to the FMV of the shares at the time of the gift — not just your basis. For stock worth $200,000 with a $20,000 basis, you deduct $200,000 and recognize zero capital gain.⁵
• DAF vs. direct donation. A donor-advised fund receives the shares, sells them (tax-free inside the fund), and holds the proceeds until you grant them to charities over future years. This lets you take the deduction in a high-income year (the year of the 10b5-1 plan gains) but distribute to charities on your own timeline. Direct donations to a public charity accomplish the same tax result if you want the giving done immediately.
• Deduction limits. Appreciated property donations to a public charity or DAF are deductible up to 30% of AGI in the year of contribution, with five-year carryforward. For an executive with $2M of AGI, the annual ceiling is $600,000 — more than enough for most single-year events.
• What the plan covers vs. the donation. The 10b5-1 plan governs sales. Donations are transfers, not sales. You can donate employer shares outside the plan without triggering the plan's compliance structure — but confirm with your issuer's compliance team and securities counsel before transferring shares subject to lock-up, Rule 144, or Section 16 reporting obligations. Section 16 officers must report gifts on Form 4 within two business days.

IRMAA lookback: Medicare premium impact

For executives within two or three years of Medicare eligibility (age 65), a high-AGI year triggers Medicare Part B and Part D income-related monthly adjustment amounts (IRMAA) two years later. In 2026, IRMAA surcharges begin at AGI above $106,000 (single) or $212,000 (MFJ), with the highest tier adding over $450/month in additional premiums per person.⁶

A senior officer at age 63 who sells $3M of employer stock in 2026 will face elevated Medicare premiums in 2028 and 2029. This does not change the decision to sell — the plan is already in place — but it is a real cost to build into the retirement income model. If the plan allows timing flexibility between December and January, the IRMAA impact is worth calculating against the tax-year stacking.

ISO and AMT pre-year-end sizing

Incentive stock options are typically excluded from the 10b5-1 plan itself (see the RSU and options guide for why). But if you plan to exercise ISOs in the same year as large plan sales, the AMT interaction needs pre-year-end modeling.

The ISO spread at exercise is an AMT preference item. For 2026, the AMT exemption is $90,100 (single) or $140,200 (MFJ), phasing out at $500,000 / $1,000,000 at a 50% rate.⁷ An executive with $2M in AGI from ordinary income has already fully exhausted the exemption. Adding an ISO spread of $500,000 triggers a tentative minimum tax calculation on the full spread at 26%–28%, and AMT is owed if that exceeds regular tax.

Year-end ISO strategy: if you have an option position approaching expiration, or a year with lower-than-average other income (lighter plan sales), that may be the year to exercise. The interaction between regular tax, AMT, and the plan's capital-gains stacking makes this a calculation worth running in October or November.

Estimated tax payments

Capital gains and other income not subject to withholding require estimated tax payments to avoid underpayment penalties. For 2026 tax year:

• Q4 estimated payment due: January 15, 2027. This covers income earned October 1–December 31, 2026.
• Safe harbor — pay 100% of prior year liability if prior year AGI was $150,000 or less. If prior year AGI exceeded $150,000, the safe harbor is 110% of prior year liability. This is the most reliable way to avoid underpayment penalties when the current year is unusually large.³
• Withholding coordination: If a large bonus is payable in December with 22% withholding (the supplemental rate), and the effective marginal rate on the income is 37%, a $400,000 bonus creates a $60,000+ underpayment that should be covered by the January estimate.
• State estimated tax: Most high-income executive states (California, New York, Massachusetts, Minnesota) have their own safe-harbor rules and deadlines. California's Q4 estimated payment is January 15; New York follows federal timing. Confirm state requirements with your CPA.

Planning for the following year

Q4 is also when the next year's plan structure becomes relevant. If you are on a cooling-off period that ends in Q1, or if your plan terminates in December and you want continuity, the planning conversation with your advisor, broker, and counsel should start no later than October:

• Review whether your current plan's cadence and lot selection still match your tax objectives for the following year.
• If you anticipate a major income event next year (IPO, secondary offering, M&A), the plan's sale schedule should be modeled against that scenario.
• If you plan to adopt a new plan after December 31, note that the cooling-off period runs from adoption — typically 90 days for officers, or the later of 90 days or the next earnings release day. An adoption on January 15 means first trade no earlier than April 15 in a normal quarter. See the cooling-off period guide and the sale schedule planner for timing modeling.