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On a $5M IPO gain, you pay 23.8% in federal capital gains and NIIT ($1,190,000), plus Washington's tiered excise tax at 7% on the first $1M of taxable state gain and 9.9% on the remainder above the $278,000 standard deduction (approximately $455,000). No lockup-period strategy. No equity type optimization. No charitable offset. Every dollar of gain taxed in full in the year of the liquidity event.
With Capital Tax Pre-IPO Planning Service
Through ISO holding period optimization, RSU withholding strategy, charitable deduction layering, and post-lockup sale timing relative to Washington's 9.9% excise tax thresholds, the estimated combined federal and Washington state tax bill at the liquidity event falls to approximately $490,000 on the same $5M gain. That is over $1.1 million in additional after-tax proceeds retained by the founder or employee.
| Income Category | Without Allocation Strategy | With Optimized Strategy | With Optimized Strategy |
|---|---|---|---|
| Total IPO Gain (RSU / ISO / Founder Equity) | $5,000,000 | $5,000,000 | $5,000,000 |
| Federal Capital Gains + NIIT (23.8%) | $1,190,000 | $285,600 (ISO optimization + deferred sale timing) | $5,000,000 |
| Washington Capital Gains Excise Tax | ~$455,000 | ~$204,400 (threshold management + charitable offset) | $5,000,000 |
| Total Combined Tax at Liquidity Event | $1,645,000 | ~$490,000 | $5,000,000 |
| After-Tax Proceeds You Retain | $3,355,000 | ~$4,510,000 | $5,000,000 |
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Equity Type Classification and Washington Excise Tax Mapping
RSUs, ISOs, NQSOs, and founder shares are each taxed differently at the federal level, and Washington’s capital gains excise tax applies to the long-term capital gain portions at rates from 7% to 9.9%. We classify every equity holding you carry, map the Washington excise tax treatment for each, and calculate your total state exposure before the IPO filing date so there are no surprises at vesting.
ISO Exercise Schedule Optimized Against Lockup and AMT
We build an ISO exercise schedule timed around your IPO date, the one-year holding period required for capital gains treatment, and your Alternative Minimum Tax exposure in the exercise year. For Washington residents, we also layer in the excise tax threshold analysis so that your exercise strategy minimizes both federal AMT and state tax simultaneously rather than optimizing for one at the cost of the other.
RSU Withholding Strategy and Lockup Gap Liquidity Plan
RSU income at vesting is subject to mandatory federal withholding at 22% for the first $1 million and 37% above that, but high earners are routinely underwithheld. We calculate your actual tax liability at each vesting tranche, recommend supplemental withholding or estimated tax payments, and build a liquidity plan so you have cash to cover the tax bill during the lockup period when shares cannot be sold.
Millionaire Tax Income Recognition Timing Strategy
For founders and employees with large equity positions whose IPO is planned for 2027 or later, we model income recognition across the years surrounding the liquidity event and identify whether deferring or accelerating equity income relative to Washington’s Millionaire Tax effective date of January 1, 2028 produces a better after-tax result. This includes analysis of deferred compensation plans, installment sale structures, and charitable deduction strategies to manage income below the $1 million threshold where possible.
Charitable Deduction and Post-IPO Diversification Strategy
Washington’s Millionaire Tax allows a charitable deduction of up to $100,000 against state taxable income. For high earners already making significant charitable contributions, this produces a reduction in both federal and Washington state exposure. We integrate charitable giving, Donor Advised Fund contributions, and post-lockup diversification sales into a single coordinated plan that reduces your Washington excise tax exposure while supporting your personal financial goals.
| Planning Area | Washington-Specific Consideration |
| Capital Gains Excise Tax | 7% on gains up to $1M; 9.9% above $1M above $278,000 deduction (2025+) |
| Millionaire Tax (SB 6346) | 9.9% on income above $1M; effective January 1, 2028 |
| RSU Income at IPO | Ordinary income at vesting; Washington excise applies to subsequent capital gain |
| ISO Holding Period | One year post-exercise and two years post-grant required for capital gains treatment |
| Charitable Deduction (Millionaire Tax) | Up to $100,000 deductible against Washington taxable income under SB 6346 |
