Instacart RSUs
Instacart RSUs are Restricted Stock Units your company offers as part of an incentive to build company value (a ‘grant’). One unit’s value equals one share of stock’s value and these units are released to you in ratable chunks over time (‘time vesting’) during employment. The double trigger means there are two vesting requirements. Time vesting + an exit event.
At IPO, your double trigger RSU vesting will be taxed like your salary and wages (at ordinary tax rates). This income, and any tax withheld, is reported on your IRS Form W-2 in the year the units vest to you.
Federally, RSU income is withheld at a flat 22% until you reach $1M in stock compensation income in a calendar year. If you expect your effective tax rate to be higher, you will owe taxes at the end of the year on this RSU income (assuming no estimated tax payments were made during the year). State withholding varies by location.
To learn more, check out our blog post What are Double Trigger RSUs and how are they treated?
If you’ve been around with Instacart for a while, you may still have Instacart ISOs to exercise. ISOs are “Incentive Stock Options” that were created with some special benefits when you exercise and hold 2 years from grant date / 1 year from exercise date. However, the down side is Alternative Minimum Tax (“AMT”) that may be due at exercise. What is AMT? Learn more about it HERE.
There is definitely a balance of not letting the tax tail wag the dog and not having your eggs all in one basket. We tend to look at a laddered approach of spreading these out while you continue working. However, if you plan to leave your company soon, generally you will not be able to keep the options past 90 days post-IPO lockup and you will need to decide what to exercise/sell and what to exercise to keep for a bit.
Then, once you start making moves, make sure you are aware of alllll the tax fun. Some states have an Alternative Minimum Tax (“AMT”), just like our Federal AMT. Make sure you know what you are paying between taxes and exercise costs. Are you ready to take the risk?
Instacart NQSOs are a bit easier to understand since the moment you exercise them they are considered compensation income. So really your choice is when you want to realize that income.
For more information, check out our Instacart eBook that breaks down the tax ramifications for each type of stock.
As always, please remember to review your beneficiary information annually to ensure it matches with your wishes!
Family Planning: No path is the same and this benefit helps you through the process of fertility, adoption, and other ways to realize your family goals. Benefits on eligible services up to $10,000 (lifetime maximum).
Disclosure: Recommendations are of a general nature above and are not based on knowledge of any individual’s specific needs or circumstances. There is no intent to provide individual investment advisory, supervisory or management services.