IPO Financial Planning for Tech Employees: Lockup, Taxes, and What to Do Next

An IPO is the biggest financial event in most tech employees' careers. Years of below-market salary and unvested equity suddenly become real money — or at least, potentially real money. The mechanics are more complicated than most employees realize, and the decisions you make in the 6–12 months around IPO day can permanently affect your after-tax outcome by hundreds of thousands of dollars.

This guide covers the full arc: what happens to your equity the day your company goes public, how the lockup period works, what your options look like when it expires, and how to plan around the tax exposure that comes with a large liquidity event.

What happens to your stock at IPO

RSUs with double-trigger vesting

Most pre-IPO companies use double-trigger RSU vesting: your shares don't vest until both (1) a time-based schedule is met and (2) a liquidity event occurs. The IPO is that second trigger. The day the company goes public, all previously time-vested but liquidity-locked RSUs vest simultaneously.

This creates a large taxable event on IPO day. The FMV of every double-trigger RSU that vests on IPO day is ordinary income, taxed at your marginal rate — no different from receiving that amount as salary. For a senior engineer with four years of accumulated double-trigger RSUs worth $800K at IPO price, that's $800K of ordinary income in a single tax year.

Key implications:

• Estimated taxes: If your employer's supplemental withholding (22%) is lower than your actual marginal rate (potentially 37% federal + state), you'll owe the difference. File a Form W-4 adjustment or pay estimated taxes by the quarterly deadline.
• Sell-to-cover or net settlement: Most companies automatically withhold shares to cover the tax liability. Check how many shares you'll actually receive.
• Lockup applies immediately: Even though the income is recognized on IPO day, you typically can't sell the shares until lockup expires.

Stock options: ISOs and NSOs at IPO

Stock options don't automatically vest or convert at IPO — they follow whatever vesting schedule you have. But the IPO creates important decision windows:

Incentive Stock Options (ISOs): The spread between strike price and FMV at exercise is an AMT preference item. In pre-IPO days, exercising ISOs was risky because you'd owe AMT on paper gains with no way to sell shares to cover. Post-IPO, you can now exercise and immediately sell to cover the AMT, or plan exercises over multiple years to stay within AMT-free limits. See our ISO AMT calculator to model how many shares you can exercise without triggering AMT in a given year.

Non-Qualified Stock Options (NSOs): Exercise spread is ordinary income, withheld by the company. No AMT exposure, but full ordinary income tax at your marginal rate.

One important window: if you hold early-stage restricted stock (not RSUs) that was purchased with an 83(b) election, your clock for long-term capital gains and QSBS qualification started at grant, not at IPO. See the QSBS section below.

The 180-day lockup period

Most IPO underwriting agreements require employees and major shareholders to hold their shares for 180 days after the IPO date. This is not an SEC rule — it's a contractual obligation in your lockup agreement. The specific terms are disclosed in the company's S-1 registration statement.

What you can and can't do during lockup

During the lockup period:

• Cannot sell shares that are subject to the lockup agreement.
• Can exercise stock options — the lockup restricts sale, not exercise. Exercising vested ISOs or NSOs during lockup is permitted, which is important for ISO long-term holding period planning.
• Can gift shares in some cases, but gifted shares typically carry the same lockup restriction over to the recipient.
• Cannot short the stock or buy put options — these are effectively synthetic sales and may violate both the lockup and company insider trading policies.
• Subject to blackout windows during earnings periods — the 180-day clock doesn't mean you can trade freely the moment it expires if you're inside an earnings blackout.

Blackout periods after lockup

After lockup expires, you're now subject to the company's regular insider trading policy, which typically restricts trades to quarterly "open windows" — usually the two to four weeks following an earnings release. If you're on the insider list (any employee with access to material non-public information), you may need pre-clearance for trades. Senior engineers and above are often on the insider list automatically.

Practically, this means your first real selling window might be 180 days post-IPO plus a few weeks to wait for the next earnings open window.

Post-lockup strategy: how much should you sell?

This is the question most employees agonize over. The answer depends on your overall financial picture, but a few frameworks help:

The concentration risk baseline

A single stock shouldn't represent more than 10–15% of your investable net worth for most people — and even that threshold is generous if the stock is volatile tech equity correlated with your job security. If your employer's stock is 80% of your net worth, the expected-value argument for holding is usually overwhelmed by the variance and correlation risk.

See our concentrated stock risk guide for the full framework on systematic selling, lot selection, 10b5-1 plans, and tax-efficient diversification strategies.

Systematic selling vs. all-at-once

Selling all shares at lockup expiration avoids timing regret in one direction but concentrates your tax liability in one year. Selling systematically over 2–3 years spreads tax exposure but maintains concentration risk longer. The right answer depends on the stock's volatility, your QSBS eligibility (see below), your projected income in future years, and your risk tolerance.

10b5-1 plans

A 10b5-1 plan pre-commits you to a selling schedule set up when you're not in possession of material non-public information. Once established, trades execute automatically regardless of your knowledge of upcoming earnings. This gives you a defensible paper trail and removes insider trading risk from your diversification strategy. Most public tech companies allow employees to set up 10b5-1 plans; your equity administrator or broker (Fidelity, Schwab, Morgan Stanley) can facilitate.

QSBS: the tax exemption most employees overlook

If you received and early-exercised stock options or purchased restricted stock in a qualified startup, you may be able to exclude a large portion of your IPO gains under § 1202 Qualified Small Business Stock (QSBS). This is one of the most valuable and underused provisions in the tax code for startup employees.

Basic QSBS eligibility requirements

• Stock must be in a domestic C-corporation (most startups qualify; S-corps and LLCs do not).
• The company's aggregate gross assets must have been under $75M at the time of issuance (up from $50M under OBBBA).³
• The company must be an active business in a qualifying industry (finance, hospitality, law, health, and several other fields are excluded; software and tech generally qualify).
• You must have acquired the stock at original issuance — secondary market purchases don't count.
• You must have held the stock continuously for the required period.

Exclusion amounts: OBBBA tiered structure

The One Big Beautiful Bill Act (OBBBA, July 2025) significantly changed QSBS rules. The treatment depends on when your stock was issued:

Stock issued on or before July 4, 2025: Original $10M cap (or 10× adjusted basis). 100% gain exclusion if held 5+ years. The non-excluded portion is taxed at 28% (not LTCG rates).

Stock issued after July 4, 2025: New tiered exclusion — 50% if held at least 3 years, 75% at 4 years, 100% at 5 years. Cap is now the greater of $15M or 10× your adjusted basis, with annual inflation adjustments starting 2027. The non-excluded portion is taxed at 28%.³

Note: California does not conform to federal QSBS exclusion. California residents owe state income tax on 100% of the gain regardless of QSBS. See our California equity tax guide for details on state tax exposure and the California AMT for ISOs.

RSUs and QSBS

Standard RSUs do not qualify for QSBS. RSUs are a right to receive stock, not a stock purchase — you can't make an 83(b) election on RSUs, and the QSBS clock doesn't start until shares are actually delivered (which for double-trigger RSUs is at IPO, so the 5-year holding period doesn't apply to your IPO proceeds).

QSBS eligibility is primarily for employees who early-exercised ISOs or purchased restricted stock (with an 83(b) election) years before the IPO.

IPO year tax planning

An IPO year is typically an extraordinarily high-income year. Planning steps to take before and during:

Estimate your total income for the year

Add up: your W-2 base salary, any bonus, the value of double-trigger RSU vests at IPO (ordinary income), any option exercises during the year, and any vested equity from your existing quarterly vest schedule. If you're in California or New York, add state-level withholding on top.

A senior engineer at a company with a successful IPO could easily land at $1M–$3M in gross income in the IPO year. At that level, you're in the 37% federal bracket for ordinary income and the 20% LTCG rate plus 3.8% NIIT for any subsequent sales.

2026 tax rates reference

Source: IRS Rev. Proc. 2025-32. LTCG thresholds are based on taxable income. NIIT threshold is based on MAGI and is not inflation-adjusted.

Maximize pre-tax contributions before year end

In a high-income IPO year, every dollar of pre-tax reduction is worth more than usual:

• 401(k) deferral: Max the $24,500 2026 employee deferral (plus $8,000 catch-up if 50+, or $11,250 if ages 60–63).
• Mega Backdoor Roth: If your plan allows after-tax contributions with in-plan conversion, contribute up to the 2026 §415(c) total limit ($72,000 including employer match) and convert to Roth. This space is especially valuable in a year when your marginal rate is high. See our Mega Backdoor Roth calculator.
• HSA: Max the $4,400 (self-only) or $8,750 (family) 2026 HSA contribution if you're on an HDHP. Triple-tax-advantaged savings that don't go away.
• NQDC: If your company offers a Non-Qualified Deferred Compensation plan, the pre-IPO election window may already be closed for the current year — but check. Deferring additional compensation into future years when your income may be lower can be valuable.

Tax-loss harvesting

A large IPO gain year is also a good time to harvest losses elsewhere in your portfolio. Realized losses offset realized gains dollar-for-dollar; losses beyond gains offset up to $3,000 of ordinary income per year, with the remainder carried forward.

Charitable giving

Donating appreciated stock (or newly vested shares that have appreciated since vest) to a Donor-Advised Fund is one of the most tax-efficient charitable moves you can make in a high-income year. You get a deduction for the full FMV at the time of donation, and the DAF sells the shares tax-free. In an IPO year when you're in the 37% bracket, timing your bunched charitable contributions here has compounded value.

State tax considerations

Where you live at IPO matters enormously for your state tax bill:

• California: Top rate 13.3% (12.3% + 1% mental health surcharge) on all income including capital gains. No preferential treatment for LTCG. No QSBS conformity. If you're considering relocating to a no-income-tax state, doing it before shares vest or before you sell post-lockup requires careful planning — California's long-arm sourcing rules can apply to pre-move equity events. See our California equity tax guide.
• Washington: No income tax. 7% capital gains income tax (CGIT) on net LTCG above $278K (2025 threshold); 9.9% above $1M under ESSB 5813. Retirement accounts and real estate are exempt. See our Washington equity tax guide.
• New York / NYC: NY rate up to 9.65% for income above $1.077M; NYC adds up to 3.876%. Combined ~13.5% for millionaires in NYC. No LTCG preference. See our New York equity tax guide.
• Texas: No state income or capital gains tax. Most favorable for post-lockup selling. If you relocated from California, verify the long-arm grant-to-vest sourcing rules still apply to pre-move RSU grants. See our Texas equity tax guide.

When to work with a financial advisor

Not every IPO situation needs professional help. But the complexity multiplies quickly when:

• You have a mix of ISOs, NSOs, early-exercised restricted stock (with 83(b) elections), and double-trigger RSUs — each with different tax treatment at IPO and post-lockup
• Your IPO income will push you into AMT territory, and you have unexercised ISOs you want to plan around
• You may qualify for QSBS exclusion on some of your shares and need to confirm eligibility and optimize the holding period
• You're in California and considering a relocation before or after lockup expiration — the timing here can be worth hundreds of thousands in state taxes
• Your employer stock will represent more than 30% of your net worth after lockup expiration, and you need a systematic diversification plan
• You're trying to time a large charitable contribution, a home purchase, or a job transition around the same year

A fee-only financial advisor who works with tech employees doesn't manage your assets — they charge a flat fee or hourly rate to build the plan, model the scenarios, and give you specific recommendations. For a liquidity event of this magnitude, that's a small fraction of the potential tax savings.