When should you sell your stock options?
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You hold stock options at a startup that could go public, and you're facing a question with real money behind it: when should you sell?
Timing the sale means weighing taxes, financial goals, and market uncertainty all at once.
There's no perfect time to sell your startup stock, but based on our experience doing nothing is usually the least advantageous. Building a plan for your equity can help guide you to make the best decisions for your financial future. To help start building your plan you need to understand the type of options you have, review your vesting schedule, and understand how timing could impact your taxes.
Here are five considerations that can help you build your plan and feel more confident in your decisions.
Selling your startup stock will impact your tax bill. How much you owe depends on several things, including:
You may be able to make choices that help reduce how much you owe in taxes. If you own shares for at least 12 months before selling, you'll pay less in taxes when you sell at a gain.
This is thanks to the long-term capital gains tax rate, which is lower than the rate on gains from shares held less than a year. Currently, long-term capital gains rates are 0%, 15%, or 20% depending on your taxable income. The earlier you exercise your stock options, the sooner you can sell and qualify for long-term capital gains.
The specific numbers differ from person to person. Add your details to our Stock Option Tax Calculator to see what taxes you may owe and review strategies to reduce the taxes upon selling.
A word about timing: You'll likely be subject to certain windows when you aren't able to trade.
For example, after the IPO, there's usually a lock-up period of 90 or 180 days where employees can't sell their shares. There may be "early releases" from the lock-up, allowing you to cash out a small amount early on.
Public companies also commonly have blackout periods when employees can't trade their shares in the company, usually surrounding the announcement of quarterly and annual financial results.
It's important to be familiar with your trading windows and exercise window so you can nail the timing and properly execute your strategy. Ask your current or former employer about key dates and keep an eye out for communications during the exit process.
Are you primarily focused on the short term? Maybe you've been planning to remodel your kitchen, get a vacation home or finally get a new car. Or perhaps your focus is on longer-term goals, like funding your retirement or covering college expenses.
While holding your shares for at least 12 months can secure beneficial tax treatment, that timeline isn't necessarily a fixed target. Maybe you really need that new car now or your HVAC system broke down. If you have an immediate need that can't be put off, selling your shares and using the gains could be a better alternative to taking out a loan or accruing debt. In some cases, you might want to act now if you expect costs to rise.
Clarity around your goals can help you strike a balance between unlocking cash to meet short-term goals and managing upside potential to meet longer-term targets.
You may be excited to hang on to your startup shares because you think they have great potential to increase in value. It's natural to be optimistic about the value of your company. After all, you work(ed) there for a reason!
On the other hand, you might have a less-than-rosy outlook for the company and want to sell on the secondary market before the value declines.
In any case, try to stay objective. Once your company goes public, a wide variety of investors will be able to trade the stock. They probably won't all share your views, which means the share price will likely move differently than you think it should.
It's sensible to want to capture the advantages of long-term capital gains tax rates. As you're waiting, though, the stock price could decline, putting your primary financial goals in jeopardy.
Taxes can also cloud your thinking around the choice to exercise your stock options. You may be tempted to skip exercising ahead of the IPO because the immediate tax bill would be too burdensome. However, if you wait and opt instead for a cashless exercise, you could be minimizing your gains by paying the highest possible tax rates.
Non-recourse financing can help you exercise before an IPO, covering the cost of purchasing your options and the immediate tax bill. This is exactly why we started Secfi — we've helped thousands of startup employees exercise their options and cover the associated taxes through non-recourse financing, so they don't have to choose between their equity and their savings.
It's risky to have a large chunk of your worth in any single investment or asset class, whether it be a real estate project, cryptocurrency, meme stock or shares in a startup.
The risk is particularly elevated when you're too heavily invested in your current employer's stock, as you already count on the success of the business to pay your salary and benefits.
How much money you should have in any given investment will depend on several factors, including your net worth and risk tolerance. You may need to sell shares to improve your diversification, even if there are tax implications.
With so many variables — option type, holding period, tax brackets, financial goals — it's easy to overthink the timing of a sale. This checklist distills the key questions into a single pass so you can identify what's blocking your decision and what needs more research.
We founded Secfi after experiencing the problem firsthand: the cost of exercising stock options — and the taxes that come with them — can be too high for many employees to handle on their own. We built Secfi to help startup employees access the upside of their equity without taking on unnecessary personal financial risk.
Today, employees at companies like Databricks, Anduril, and Gusto work with Secfi to understand their equity, plan their strategy, and access financing that lets them exercise stock options without putting personal assets on the line.
Maeve is Secfi's AI, built specifically for stock option and equity decisions. Unlike general-purpose AI tools, Maeve connects to Secfi's proprietary tax calculation engines, real-time market data (409A valuations, secondary market signals, and fund marks), and your actual equity details — grant types, vesting schedules, exercise history, and tax filing status.
Ask Maeve questions like "What would my tax bill be if I exercised my ISOs today?" or "Should I exercise now or wait for the IPO?" and it will model the scenarios using your real numbers, not generic estimates. It handles AMT calculations, compares exercising now versus at exit, projects capital gains under different holding periods, and evaluates secondary sale offers — all in a single conversation.
Each calculation includes inline citations that distinguish between verified Secfi calculations and AI estimations, so you can follow the math rather than blindly trusting a number. That transparency matters when the decisions involve hundreds of thousands of dollars.
Maeve is free to use. Sign up and try it — it takes less than a minute to connect your equity data and start modeling your options.
With Secfi's non-recourse financing, you can exercise your stock options and pay the tax bill without dipping into savings. If the company's stock doesn't perform, you're not personally on the hook for repayment.
Secfi's equity strategists specialize in stock option planning, AMT, exercise timing, and long-term wealth strategy. They've seen hundreds of IPO and pre-IPO scenarios and can help you build a plan tailored to your situation.
You can't sell unexercised options, but you may be able to sell exercised shares through a secondary market transaction if your company permits it. Check your stock option agreement for transfer restrictions.
It depends on the option type and holding period. ISOs held 12+ months after exercise (and 2+ years after grant) qualify for long-term capital gains rates. NSOs are taxed as ordinary income on the spread at exercise, with additional gains taxed at capital gains rates. Use Secfi’s Stock Option Tax Calculator to estimate your bill.
It depends on your financial situation and company outlook. Most companies give departing employees only a 90-day post-termination exercise period. Miss that deadline, and you lose your vested options. Secfi’s non-recourse financing can help cover the cost if upfront cash is a concern.