This wealth advisor glossary from Modera Wealth Management explains, in plain English, the terms a tech employee meets when RSUs, stock options and an employee stock purchase plan add up to too much of one stock.
Each entry gives a short definition and then why it matters, sometimes with a small round-number example. Limits and ages that change by year are given for tax year 2026 only; for anything else, check the current IRS limit. This is general education, not individual tax, legal or investment advice, and every investment carries the risk of loss, including the money originally invested.
A
- Alternative minimum tax (AMT)
- A parallel federal tax calculation that disallows some deductions and counts certain income, such as the spread on exercised incentive stock options. It matters because exercising ISOs and holding the shares can trigger an AMT bill even though you sold nothing. Check the current IRS limit for exemptions.
- Asset location strategy
- Deciding which investments sit in which account type (taxable, traditional IRA or 401(k), Roth) to lower the tax bill. For example, a bond fund paying taxable interest usually fits better in an IRA than in a brokerage account.
B
- Backdoor Roth IRA
- A two-step method where you contribute to a nondeductible traditional IRA and then convert it to a Roth IRA. It matters if your income is above the Roth limit ($153,000-$168,000 single, $242,000-$252,000 joint in 2026). Existing pre-tax IRA balances can make the conversion partly taxable.
- Blackout period
- A window, often around quarterly earnings, when company insiders and many employees may not trade company stock. If your RSUs vest or you need cash during a blackout, you may have to wait to sell, so plan sales around the calendar.
C
- Capital gain
- The profit when you sell an investment for more than its cost basis. Gains on assets held longer than one year are usually taxed at lower long-term rates than ordinary income. Shares sold a month after vesting typically show little gain, because basis is close to the sale price.
- Capital loss
- The loss when you sell an investment for less than its cost basis. Losses offset capital gains, and a limited amount can offset ordinary income each year (check the current limit). They are the raw material for tax-loss harvesting.
- Concentrated stock diversification
- Selling or gradually reducing a large holding in one company and spreading the money across many investments. A common shortcut: if more than a fifth of your net worth sits in one stock, diversification usually comes before other goals. Sales are timed against the tax bill.
- Cost basis
- The amount used to measure your gain or loss when you sell, usually what you paid plus certain adjustments. For RSUs, basis is the stock's value on the vest date. Check that your 1099-B shows it correctly, since brokers sometimes report RSU basis as zero.
D
- Disqualifying disposition
- Selling ISO or ESPP shares before meeting the required holding periods. It turns part of the gain into ordinary income instead of long-term capital gain. If you sell right after buying at a discount through your ESPP, the discount is taxed like wages.
- Donor-advised fund (DAF)
- A charitable account where you give cash or stock, take the tax deduction in that year, and recommend grants to charities over time. Giving appreciated company shares to a DAF avoids tax on the gain; Modera Wealth Management helps clients compare this with selling first.
E
- Employee stock purchase plan (ESPP)
- A company program that lets you buy company stock through payroll deductions, often at a discount. A 15 percent discount on $10,000 of purchases is a built-in gain of about $1,765, so many employees sell soon after buying and put the cash elsewhere.
- ESPP lookback
- A feature that sets your purchase price from the lower of the stock price at the start of the offering period or at purchase. It can make the discount far larger than the stated percentage when the stock has risen, which is why ESPP participation often pays.
- Exchange fund
- A private pooled fund where many investors contribute concentrated stock in exchange for shares of a diversified basket, without selling and without an immediate tax bill. It matters if you hold highly appreciated stock, but it usually has a multi-year lock-up, minimums and fees.
- Exercise price (strike price)
- The fixed price per share you pay to buy stock under an option grant. If your strike is $20 and the stock trades at $50, each option has a $30 spread. Your tax depends on the option type and when you sell.
F
- Fiduciary
- A person or firm legally required to put a client's interests ahead of their own when giving advice. Ask any advisor in writing whether they act as a fiduciary all the time, or only for some services, and how they are paid.
- Fixed-income security
- A bond or similar investment that pays interest on a set schedule and returns principal at maturity. Interest is usually taxed as ordinary income, which is one reason bonds often sit in IRAs under an asset location strategy.
G
- Grant date and vesting schedule
- The grant date is when your company awards equity; the vesting schedule says when you earn it, often over four years with a one-year cliff. If you leave before shares vest, you generally forfeit them.
H
- Health savings account (HSA)
- A tax-advantaged account for medical costs, available with a qualifying high-deductible health plan. The 2026 limit is $4,400 self-only or $8,750 family, plus $1,000 at 55 and older. Contributions, growth and qualified withdrawals can all escape federal tax.
I
- Incentive stock option (ISO)
- A stock option with special tax treatment: no regular income tax at exercise, but the spread counts for AMT. Hold the shares more than one year after exercise and two years after grant, and the gain is long-term. Exercising too much at once is a classic mistake.
- ISO exercise planning
- Choosing how many incentive stock options to exercise, and when, so the AMT bill stays manageable. A hypothetical employee might exercise only enough shares each year to stay under a set AMT amount, rather than all at once before expiration.
L
- Long-term capital gains rate
- The lower federal tax rate applied to profit on assets held more than one year. It matters when you choose between selling RSU shares at vest, with little gain, and holding them for a year. Check the current IRS brackets for the rates.
N
- Net unrealized appreciation (NUA)
- The growth in company stock held inside a 401(k). If you take the shares out in a qualifying lump sum, that growth can be taxed as long-term gain instead of ordinary income. It applies only to employer stock, and the rules are strict.
- Non-qualified stock option (NSO)
- A stock option without special tax treatment. When you exercise, the spread is taxed as ordinary income and withheld like wages. With a $30 spread on 1,000 shares, $30,000 is added to your income for that year.
R
- Restricted stock unit (RSU)
- A promise of company shares that you receive as they vest. The full value of the shares on the vest date is taxed as ordinary income, and your employer usually withholds some shares. Withholding is often below your real rate, so a tax bill can follow in April.
- Roth conversion
- Moving money from a traditional IRA or 401(k) into a Roth IRA and paying income tax on the amount moved. It can make sense in a low-income year, such as a gap between jobs, because the converted money then grows tax-free.
- Roth IRA
- An individual retirement account funded with after-tax dollars, whose growth and qualified withdrawals are tax-free. The 2026 contribution limit is $7,500 ($8,600 at 50 and older), reduced at higher incomes. It is the best home for investments you expect to grow the most.
- RSU tax planning
- Estimating the tax bill from upcoming vests and setting aside cash or adjusting withholding before it arrives. If 1,000 shares vest at $100, that is $100,000 of added income, and default withholding may leave you short at filing.
- Rule 10b5-1 plan
- A written, pre-arranged trading plan that lets insiders sell company stock on a set schedule, even when they know material nonpublic information later. It lets executives and some employees sell steadily without worrying about blackout windows. Your company's legal team controls access.
S
- Section 83(b) election
- A filing that lets you pay tax on restricted stock at grant instead of at vesting. It can lower the tax bill if the stock rises a lot later. The deadline is 30 days after grant, and missing it cannot be fixed.
- Single-stock concentration
- Having a large share of your net worth tied to one company, often because RSUs, options and ESPP shares add up while your paycheck depends on the same employer. If the stock falls 50 percent and it is half your wealth, you lose a quarter of everything.
- Spread (bargain element)
- The difference between the market price of the stock and your option's exercise price on the day you exercise. A $50 stock with a $20 strike has a $30 spread per share. For NSOs it is taxed as income; for ISOs it feeds into AMT.
T
- Tax lot
- A block of shares bought or received on the same date at the same price. Each RSU vest and ESPP purchase is its own lot with its own basis. When you sell, choosing high-basis lots first usually keeps the gain, and the tax bill, smaller.
- Tax-loss harvesting
- Selling investments that have dropped below cost to realize a capital loss, then using that loss to offset gains elsewhere. If you sell $40,000 of company stock at a gain, harvesting $15,000 in losses elsewhere lowers the taxable gain to $25,000.
- Traditional IRA
- A retirement account where contributions may be tax-deductible and growth is taxed as ordinary income when you withdraw. The 2026 contribution limit is $7,500. Deductibility can be limited if you or your spouse are covered by a workplace plan and earn above certain levels.
W
- Wash-sale rule
- An IRS rule that disallows a loss if you buy the same or a substantially identical investment within 30 days before or after the sale. ESPP purchases and RSU vests count as buys, so a vest can quietly cancel a loss you meant to harvest.
- Wealth advisor
- A professional who looks at your whole financial picture, including investments, taxes, equity pay and retirement. At Modera Wealth Management, a wealth advisor starts with where each investment sits and what selling would cost in tax before suggesting changes.