Pre-IPO Equity Tax Planning
Plan tax for pre-IPO equity events: QSBS exclusion, 83(b) early-exercise election, AMT trap, double-trigger RSUs.
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Plan tax for pre-IPO equity events: QSBS exclusion, 83(b) early-exercise election, AMT trap, double-trigger RSUs. Cite official methodology in your communications — sources linked below.
How the Calculation Works
Pre-IPO equity tax planning is the highest-stakes financial decision most senior tech employees and founders make. QSBS §1202 can exclude up to $10M (or 10x basis) of gain TAX-FREE for qualifying small business stock. Early-exercise via 83(b) starts capital gains clock. Failure to plan can cost 40%+ of equity value to taxes.
Benchmarks and Use Cases
Key planning moves: (1) 83(b) within 30 days of grant for founders/very early. (2) Exercise ISOs early in calendar year for AMT runway. (3) Sell RSUs at vest to lock value (not bet on stock). (4) QSBS hold 5 years for §1202 exclusion. (5) For California residents, plan exit timing — moving to TX/FL before IPO can save state tax.
Common Mistakes and Limitations
Common mistakes: (1) Missing 30-day 83(b) window. (2) Exercising ISO late in year, AMT bill due before sale possible. (3) Not selling RSUs at vest — risking concentrated stock decline. (4) Forgetting QSBS 5-year hold — selling in year 4 forfeits exclusion. (5) Not engaging specialized startup CPA before IPO ($3-10k fee, can save $100k-1M+ in taxes).
Last updated May 2026. Sources: IRC §1202 QSBS, IRS Pub 525.