Year-End Tax Planning for Stock Options, RSUs, and Deferred Compensation (2025 Guide)
If you have stock options, RSUs, or a deferred compensation plan, the weeks between now and December 31 aren’t just for holiday parties — they’re for decisions that can move your tax bill by tens of thousands of dollars.
Most executives wait until January, but the real savings window closes when the ball drops. Here’s what to look at now before you ring in the new year.
1. Stock Options: The AMT Game
If you hold Incentive Stock Options (ISOs) or Non-Qualified Stock Options (NSOs), timing is everything. Exercising ISOs before year-end could trigger the Alternative Minimum Tax (AMT), but done right, it can start your long-term capital-gain clock early.
ISOs: Exercise strategically. Too much in one year can trigger an AMT surprise.
NSOs: The spread between exercise and market price is ordinary income—check where it lands you in your 2025 bracket.
Tip: Run an AMT projection with a tax advisor before December 15. The IRS doesn’t celebrate Christmas, but it loves a last-minute exercise.
2. RSUs and Performance Shares: Income You Didn’t Ask For
Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) are a gift that keeps on taxing. When they vest, they create ordinary income whether you sell or not.
If you have shares vesting before year-end:
Expect higher withholding, but don’t assume it’s enough. Many employers default to 22%, even if your marginal rate is 37%.
You can sell some shares to cover taxes (“sell to cover”) or gift appreciated shares after they vest (see below).
Review vesting schedules now—one December 31 vesting can push you into a higher tax bracket.
3. Deferred Compensation: The Hidden Lever
For executives with access to non-qualified deferred compensation (NQDC) plans:
Consider deferring your 2025 bonus or other income into future years.
This can offset RSU income or option exercises this year.
It’s one of the few legal ways to smooth income spikes and stay under surtax thresholds.
If you haven’t made your elections yet, act before the plan’s cutoff date—most close in November.
4. Gifting Stock for the Holidays
Forget the sweater. Give stock.
To family: Gift appreciated shares directly. You remove future appreciation from your estate and pass gains to someone likely in a lower tax bracket.
To charity: Donate appreciated stock or use a Donor-Advised Fund (DAF). You’ll deduct the full market value and skip the capital gains tax entirely.
Bonus move: If your RSUs vested at $200 per share and now trade at $300, that $100 of embedded gain disappears for good if you gift it to a qualified charity.
It’s one of the rare ways to beat both capital gains and the gift tax system in one move—and it makes a better story than a gift card.
5. Why Work with an Advisor Who Understands Stock Compensation
These strategies only work when the moving parts align—option exercise, RSU vesting, bonus deferral, and gifting strategy.
Most financial advisors don’t integrate tax modeling or understand how AMT, RSU withholding, and deferred comp elections interact. That’s where a specialized advisor—or a CFP® with tax experience—can make a measurable difference.
Because a “good problem to have” like too much taxable income still costs you 37% if you ignore it.
6. Your Year-End Game Plan
Review vesting and exercise schedules.
Check tax withholdings on RSUs and bonuses.
Run a year-end AMT and income projection.
Evaluate deferred-comp elections.
Consider gifting appreciated stock before December 31.
Schedule a strategy session—don’t wing it in April.
Final Thought
Year-end planning isn’t about beating the IRS. It’s about making sure you, not the calendar, controls when you pay taxes.
A few smart moves now can turn a stressful April into a calm one—and maybe even fund next year’s vacation with what you save.
