By Matt Donahue, CFP®

As an executive, you likely feel deeply connected to your company. Your executive compensation package also probably includes a significant amount of company stock. Together, these facts tend to mean one thing: your stock is concentrated. When you take advantage of tax strategies that also diversify your portfolio, it’s possible to mitigate much of that risk.

These are some of the tax strategies I most frequently recommend to my clients:

Scheduled Sells

Tax strategies for diversifying a portfolio typically never suggest selling off most of your concentrated stock position at once. Doing so can significantly increase your tax liability.

Instead, you can create a capital gain budget and make scheduled sells over time. The capital gain budget allows you to limit the total gains you want to realize each year. It might seem like one of the simpler tax strategies out there, but it provides a simple way to avoid unpleasant tax surprises, and having a detailed plan in place can help prevent your emotions from driving your financial decisions.

Tax-Loss Harvesting

Having capital gains can be a solid tax mitigation strategy, however, your plan could become more effective when you pair it with tax-loss harvesting. 

With tax-loss harvesting, you sell underperforming investments at a loss and buy another investment so you are never out of the market. The loss can be used to offset any capital gains, thus reducing or eliminating any potential capital gains tax. Another potentially huge benefit is that any unused capital losses can be carried forward indefinitely to offset future gains from the sale of your company stock.

For many clients, it’s difficult to decide which investments to sell and when. That’s why we’re here. Our team takes the time needed to get to know you before building and implementing customized tax strategies.

Charitable Vehicles

For tech executives, gifting appreciated stock to qualifying charities can have multiple advantages:

• You won’t owe capital gains tax on the appreciated amount.
• The charity won’t owe capital gains tax.
• You can deduct the fair market value of the stock.

There are multiple charitable giving vehicles you might choose when donating company stock, but the two I find myself recommending most often are a donor-advised fund (DAF) and a charitable remainder trust (CRT).

With a donor-advised fund, you receive an immediate tax deduction, but you have time to consider where you’d like the charitable donations to go. With a CRT, you or a beneficiary receives an income stream from the trust for a set time period. After the time period ends, the remaining assets go to a charity of your choice.

Exchange Fund

If you choose this option, you can pool your concentrated stock with other investors’ concentrated stock. After a set time period (usually seven years), you are given a share of the diversified portfolio.

Direct Indexing

This can be a particularly efficient way to diversify over time:

• Create a portfolio of stocks that mirrors an index.
• Exclude your concentrated stock position from the index.
• Gradually sell the concentrated stock position over time.
• Harvest losses from other stocks in the index to offset gains.

From there, you can reinvest proceeds into diversified positions. Like many of the other tax strategies mentioned, this one may help you build a highly resilient portfolio.

Let Us Help You Find the Right Tax Strategies

At Thrive Wealth Management, LLC, we understand why you may be hesitant to sell off some of your company stock. However, it’s important to understand that diversifying doesn’t mean you’re losing faith in your company or in your own ability to lead. 

No matter how strong your company’s performance may be, tying such a large part of your net worth to a single company’s performance can jeopardize your financial future.

If you want to know more about us and how we can help you implement sound tax strategies, contact us today. To schedule a meeting, call (215) 376-5530 or email Matt@thrivewealth.com.

Frequently Asked Questions About Tax Strategies for Tech Execs

1. What tax strategies can help tech executives reduce risk from concentrated stock positions?

Tax strategies such as scheduled sells, capital gains budgeting, and tax-loss harvesting can help you gradually reduce concentration without triggering major tax consequences. These approaches can allow you to diversify thoughtfully while keeping your tax bill in check.

2. How do charitable giving vehicles fit into tax strategies for concentrated stock?

Charitable vehicles like donor-advised funds (DAFs) and charitable remainder trusts (CRTs) are powerful tax strategies because they allow you to donate appreciated stock without realizing capital gains. You may also receive a deduction for the full appreciated value, making philanthropy both financially efficient and personally meaningful.

3. What advanced tax strategies can help me diversify without immediately selling my company stock?

Options such as exchange funds and direct indexing provide ways to diversify over time while integrating tax strategies that offset gains and spread out sales. These methods can help you build a more resilient, balanced portfolio while managing your tax exposure.

About Matt

Matt Donahue, CFP®, is a Financial Planner at Thrive Wealth Management, LLC, a boutique financial planning firm in Blue Bell, Pennsylvania. Dedicated to helping people gain clarity and confidence in their financial lives, Matt is known around the office for his transparency, responsiveness, and passion for helping clients. He seeks to build long-term relationships by focusing on each client’s unique goals and needs, guiding them through life’s financial transitions with empathy, insight, and clear communication. Matt takes pride in helping clients make informed decisions, simplify complex topics, and feel confident and empowered about their financial future. He says, “Financial planning is deeply personal, and being chosen to help someone manage their wealth and plan for their future is a massive responsibility.”

Matt began his financial services career in 2013 at United Capital, now a division of Goldman Sachs, where he assisted with creating financial plans, implementing investment portfolios, and contributing to the investment management committee. He earned his BA in Business & Economics from Ursinus College and holds the CERTIFIED FINANCIAL PLANNER® designation. He currently resides in Ambler, Pennsylvania, with his wife and son. Outside of work, he enjoys spending time with family, volunteering with the Association for FTD, and playing basketball and golf. To learn more about Matt, connect with him on LinkedIn.

Disclosure:

This material is provided for informational and educational purposes only, should not be viewed as an exhaustive discussion of the topics presented, and should not be construed as individualized advice for any reader’s personal circumstances. For guidance on how these matters may impact your financial plan or investment portfolio, please contact your Thrive Wealth Management, LLC representative. While the information presented is believed to be factual and up to date, Thrive Wealth Management, LLC does not guarantee its accuracy and, due to various factors, including but not limited to changing laws and regulations, this information is subject to change. All expressions of opinion reflect the judgment of the authors as of the date of publication. Thrive Wealth Management, LLC is not a law firm or an accounting firm, and no content contained herein should be construed as legal or accounting advice. Please consult with the qualified professional(s) of your choosing for legal and accounting advice.

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