To diversify company stock, sell the lots with the smallest tax bill per dollar first, name each lot before the trade settles, and keep the lowest-basis shares for last. In the hypothetical below, naming a $24 lot instead of a $2 lot cuts the tax bill on a $60,000 sale from $8,400 to $1,800.
Most engineers assume the broker already knows their cost basis, and that selling the oldest shares first is the safe default. Neither is reliable. Brokers often show a basis that leaves out income already taxed on your W-2, and the first-in, first-out default can sell your cheapest shares first, which carry the biggest gain.
Modera Wealth Management put this walkthrough together for tech employees who hold options, RSUs and shares from an employee stock purchase plan. It follows the calendar, from the January before a sale to the years after it, and is written for someone 10 to 15 years from retirement. Every investment can fall in value, including the index funds you buy with the proceeds, and you can end up with less than you put in.
By David Okonkwo, ChFC — Retirement Planning Specialist | Reviewed by Robert Kim, AIFDavid helps pre-retirees navigate Social Security claiming decisions and Medicare timing to maximize lifetime benefits.
Check the 1099-B basis against your W-2 before you sell. If RSU income is missing from it, you can overpay by the whole amount of the vest.
Senior Financial Planner, Modera Wealth Management
A lot with a $140 tax bill per $1,000 sold should usually wait. Sell the $30 lot first and keep the other for a gift.
CPA and Tax Director, Modera Wealth Management
Re-rank your lots every January. Prices, basis and your income all move, and the best lot to sell moves with them.
CFP® and Lead Advisor, Modera Wealth Management
The January before you sell: two numbers for every lot
You might believe your broker already knows your cost basis (what you paid, for tax purposes). Often it doesn't. For RSU and NSO shares, the 1099-B can show a basis that leaves out income already taxed on your W-2, so you'd pay tax twice if you trusted it. Private startup shares have no broker statement at all. Their basis lives in the cap-table portal and your exercise confirmations.
Each lot needs two numbers: its cost basis and the day it passes one year and a day of holding. Write both down, along with any tender deadline or trading-window date. Everything later on this page works from that list. A married couple builds one combined list from both spouses' portals.
- Lot export from the equity portal
- Exercise confirmations
- W-2 box 12 code V for NSO income
- Forms 3921 and 3922 from January
- Last year's 1099-B
Is a sell order worth the effort on a $60,000 sale?
Yes, if your lots were bought at different prices. Say you'll sell more than $25,000 this year and your cheapest and dearest lots differ by more than a few dollars a share. Then an hour spent ranking lots can save thousands, as the $6,600 in the next section shows. If you hold one lot or one vest, skip the ranking and focus on timing.
In the year of the sale: five ranks, cheapest tax bill first
Selling the oldest shares first feels safe. It isn't, because oldest often means cheapest, and cheapest means the biggest gain. Rank lots instead. First comes employer stock inside a 401(k) or IRA, where a sale creates no tax bill (check net unrealized appreciation first if a 401(k) holds low-basis company stock). Second are lots at a loss. Third are long-term lots with the highest basis. Fourth are short-term lots within weeks of the one-year mark; they should wait. Fifth are the lowest-basis long-term lots, which come last and go to charity or stay put.
For illustration, take a hypothetical couple, Shane and Celeste, 29 and 31, newly married, both at a pre-IPO startup, with student loans and a strong urge to give. A $300,000 tender offer arrives on about $650,000 of startup shares. They fill the first $60,000 at $30 a share, selling 2,000 shares. Both lots came from NSO exercises already taxed as wages. Lot A, 2,000 shares exercised three years ago at $2, has a $4,000 basis and a $56,000 long-term gain. Lot B, 2,000 shares exercised 18 months ago at $24, has a $48,000 basis and a $12,000 long-term gain.
At an assumed 15 percent rate, Lot A's tax bill is $56,000 × 0.15 = $8,400. Lot B's is $12,000 × 0.15 = $1,800. Per $1,000 sold, that's $140 of gain-share tax for Lot A against $30 for Lot B. Naming Lot B on the tender election form saves $6,600 and keeps Lot A for a later gift. Use the calculator on this site to rerun it with your own lots.
The $60,000 lands in their taxable account. Modera Wealth Management prices each lot's tax bill before the sale, then buys a broad stock index fund in taxable and keeps any bond fund inside their 401(k)s, where its interest isn't taxed each year. That's asset location at work.
Two households with the same lots can choose differently. Shane and Celeste can spread sales over many years and give Lot A to a donor-advised fund. A hypothetical single 50-year-old manager 13 years from retirement should sell more each year now, before the Medicare lookback begins at 63, and hold fewer lots for later.
The worked example
Same lots, two households
Leaving the lot field blank on the tender form, or leaving the account on first-in, first-out, would have sold Lot A and added $6,600 to the tax bill. Once the sale settles, the lot can't be swapped. The only fix is a written request to the custodian to make specific identification the default for future sales.
Does turning 50 change the order if retirement is 10 to 15 years away?
Yes, when there's a paycheck to shelter. From age 50, the IRS 401(k) catch-up for 2026 is $8,000, for a total of $32,500, and at ages 60 to 63 it rises to $11,250. You live on stock-sale proceeds while more salary goes into the 401(k). That moves money out of one stock and into a tax-deferred account.
Your situation shifts the pace. Married couples filing jointly get wider brackets than single filers, so they can sell more each year at the same rate. Large balances can add the 3.8 percent net investment income tax. Early retirees get low-income years between the last paycheck and required minimum distributions (RMDs) to take gains.
The table shows which rule switches on at which age and how each one moves a lot up or down the order. If you were born in 1960 or later, RMDs start at 75, which gives you two more low-income years.
Catch-up years
Filing status and balance size
| Age or event | Rule that switches on | Effect on the sell order |
|---|---|---|
| Any age | Held over one year: long-term rates | Wait on lots near the mark |
| 50 | 401(k) catch-up $8,000 | Live on proceeds, defer more salary |
| 60 to 63 | Higher catch-up $11,250 | Bigger shelter in peak years |
| 63 | MAGI sets Medicare premiums at 65 | Finish big gains before 63 |
| 73 (75 if born 1960+) | RMDs start | Sell earlier, while income is lower |
| At death | Basis steps up to market value | Lowest-basis lots may be kept |
After the sale: room for a price drop, a diagnosis or a tax-law change
Sell in quarterly tranches on a fixed schedule, and keep about 12 months of planned spending in cash so a drop doesn't force a sale. A serious diagnosis raises the value of keeping your lowest-basis lot, because basis steps up at death. Capital gains rates can change, so re-rank the lots each January. And MAGI at 63 sets Medicare Part B at 65, where the standard $202.90 a month can rise to $284.10 or more.
One question to bring to Modera Wealth Management about your lot list
Ask: which of my lots has the lowest tax bill per $1,000 sold this year, and what changes if I sell it in January instead of December? Bring the lot export and last year's 1099-B so the answer can be checked line by line.
Where lot ranking stops helping
Lot ranking only helps when lots have different prices. A single RSU vest, private shares where tender terms dictate which shares are bought, or company stock in a 401(k) where net unrealized appreciation may matter all need a separate look. This is general education, not individual tax advice. Related topics on this site include concentrated stock diversification, RSU tax planning and which grant to sell first.
- One vest, one price
- Tender terms that pick shares
- 401(k) company stock
Oldest shares first feels safe, but it can sell your biggest gain first.
What people ask about how to diversify company stock
How soon before a tender offer closes do I have to tell the company which share lots I'm selling?
Usually on the election form itself, by the tender deadline, so decide before you submit it. Some programs buy shares in a set order and give you no choice. Read the offer terms early. Then get a written answer from the company on whether you may name lots.
My broker sold my oldest RSU shares by default last spring; can I change which lots count on this year's tax return?
Generally no. Once a sale settles, the lots sold are fixed, and Form 8949 reports what happened. You can ask the custodian in writing to make specific identification your default for future sales. A tax professional can check whether the basis reported was correct.
Read the rules at the source
This is general information, not advice for your specific situation. Investing involves risk, including loss of principal. Nothing here replaces guidance from a tax professional or attorney. Talk to a qualified adviser before you act.