Plain-English definitions for RSUs, stock options, and equity plan terms. Skim, then hop into our guides to see examples. Education only—confirm tax details with a pro. 83(b) · A · B · C · D · E · F · G · H · I · N · O · P · Q · R · S · T · V · W
83(b)
83(b) Election
A request to be taxed on restricted stock (usually RSAs, not RSUs) at grant instead of vest. Can lower tax if the stock rises, but risky if it falls or you leave. Time-sensitive (typically 30 days from grant).
A
AMT (Alternative Minimum Tax)
Parallel tax system that can apply to ISOs. AMT can trigger even if regular tax is low. Track with a pro if you exercise ISOs.
B
Blackout Window
Periods when insiders/employees can’t trade (e.g., around earnings). A 10b5-1 plan can pre-schedule trades to navigate blackouts.
Cost Basis
What the IRS thinks you paid for the shares. Basis affects capital gains tax. With RSUs, basis is often FMV at vest.
C
Cliff Vest
A first vest that happens all at once after a set time (e.g., 25% at 12 months), then monthly/quarterly thereafter.
Capital Gains (Short-/Long-Term)
ST = held ≤1 year, taxed as ordinary income. LT = held >1 year, lower rates for most people. The clock starts when shares are delivered to you.
D
Double-Trigger RSUs
Two conditions to vest/deliver (e.g., time + liquidity event). Common in pre-IPO companies.
Disqualifying Disposition (ISO)
Selling ISO shares before meeting holding rules; favorable ISO tax treatment is lost and income may be ordinary.
E
ESPP (Employee Stock Purchase Plan)
Buy company stock via payroll at a discount; special tax rules apply. Watch holding periods and risk.
Exercise (Options)
Buying shares at the strike price. Creates a spread (FMV − strike) which can be taxable depending on ISO vs NSO.
F
Federal Supplemental Withholding
Flat method many companies use on equity income (plus payroll/state). It’s a withholding rate, not your actual tax bill.
FMV (Fair Market Value)
Share price used for tax/accounting (e.g., at vest/exercise). Often your cost basis for RSUs.
G
Grant Date
When your award is approved; vesting starts from the schedule tied to the grant.
H
Holding Period
How long you hold shares before selling—determines short- vs long-term capital gains for most equity.
I
ISO (Incentive Stock Option)
Option type with potential tax breaks if holding rules are met; can trigger AMT at exercise.
N
Net Shares (RSUs)
Company withholds some shares at vest to cover taxes and delivers the rest to you. Compare to sell to cover. See net shares vs sell to cover.
NSO (Non-Qualified Stock Option)
Taxed as ordinary income on the spread at exercise (plus payroll taxes). Capital gains apply on later appreciation after exercise.
O
Ordinary Income
Income taxed at your regular rate (e.g., RSU income at vest; NSO spread at exercise).
Option Spread
FMV minus strike price at exercise. Drives tax for NSOs; relevant for AMT on ISOs.
P
PSU (Performance Share Unit)
Shares vest based on performance goals (and often time). Payout can be above/below target.
Rule 10b5-1 Trading Plan
Pre-set trades that execute automatically to avoid insider-trading issues and blackout conflicts.
Q
Qualifying Disposition (ISO)
Meeting ISO holding rules before selling (generally ≥2 years from grant and ≥1 year from exercise) for favorable tax treatment.
R
RSU (Restricted Stock Unit)
Shares delivered to you as they vest; income taxed at vest. Post-vest moves create capital gains/losses. See our guide: RSU: net shares vs sell to cover.
RSA (Restricted Stock Award)
Actual shares at grant subject to vesting; can be eligible for an 83(b) election.
S
Sell to Cover
All shares deliver to you; you immediately sell just enough to pay taxes. Withholding is often a flat supplemental rate; your actual tax may differ. See RSU guide.
Strike (Exercise) Price
Price you pay to buy shares when exercising options.
Supplemental Withholding
Flat payroll withholding method used for bonuses/equity. It’s a prepayment—final tax is reconciled on your return.
T
Tax Lot
A group of shares with the same acquisition date and basis. You can choose lots when selling for tax control.
Tax Withholding (Equity)
Taxes withheld at vest/exercise via net shares, sell-to-cover, or cash. May not equal your final liability.
V
Vesting Date
When shares become yours (or eligible to settle). Triggers RSU income at FMV.
Vesting Schedule
Timeline for vesting (e.g., 4 years, 1-year cliff, monthly thereafter).
W
W-2 vs 1099-B / 3921
RSU income usually shows on W-2. Sales appear on 1099-B. ISO exercises can generate Form 3921. Keep all forms to reconcile basis and tax.
Withholding Rate (Reality Check)
Company withholding is just a prepayment. Your true rate may be higher/lower; expect a bill or refund at tax time.