Equity Compensation for LGBTQ+ Professionals
You open your equity dashboard and see a number that looks like it could change your life. Then you close it, because you are not sure what to do next. That is a very common experience for professionals at startups and public tech companies, especially when compensation is heavy on stock.
For LGBTQ+ professionals, equity compensation often arrives alongside other big decisions: moving to a higher-cost city, planning a family, or catching up on retirement savings. The goal is not to become a day trader. It is to turn the equity into durable wealth without a tax surprise.
RSUs vs. ISOs vs. NSOs
Restricted stock units, or RSUs, are the simplest form of equity. They vest on a schedule and are taxed as ordinary income at vest. You can sell them immediately and diversify, or hold them and accept the market risk of a single company.
Incentive stock options, or ISOs, give you the right to buy shares at a fixed price. The tax treatment can be favorable if you meet certain holding periods, but exercising can trigger the alternative minimum tax. Non-qualified stock options, or NSOs, are taxed at exercise on the bargain element and again at sale as capital gains.
The 83(b) election
An 83(b) election lets you pay tax on the current value of restricted stock early, so future appreciation is taxed at capital gains rates instead of ordinary income. It is usually only worth considering when the current value is low and you expect the company to grow significantly. The deadline is tight, typically 30 days from the grant or exercise.
Diversification rules of thumb
A useful starting point is to keep employer stock under ten to fifteen percent of your total net worth. If it is more than that, a systematic selling plan, a 10b5-1 plan, or an exchange fund can reduce risk without requiring you to time the market. The right approach depends on your tax bracket, whether the company is public or private, and your other goals.
Equity compensation is one of the fastest ways to build wealth, but it is also one of the fastest ways to end up with a lopsided portfolio. Planning the tax and timing in advance makes the difference.