Equity compensation glossary
Every term used across the Learning Hub, defined in one line.
- $100,000 rule
- The annual cap on ISO value that can first become exercisable; the excess is treated as NSOs. Read more →
- 83(b) election
- A filing made within 30 days of receiving restricted stock to be taxed at grant-date value instead of at vesting. Read more →
- AMT
- Alternative minimum tax — a parallel tax system in which an ISO exercise spread counts as income. Read more →
- AMT credit
- A carryforward credit for AMT paid on timing items such as an ISO exercise. Read more →
- AMT crossover
- The exercise size at which tentative minimum tax equals regular tax — the tax-free ISO exercise limit for the year. Read more →
- Bargain element
- The discount between fair market value and the price you pay, in an ESPP purchase or option exercise.
- Blackout window
- A period when insiders may not trade company stock.
- Cliff
- The initial period, usually one year, before any equity vests.
- Cost basis
- The amount already taxed or paid for a share, subtracted from sale proceeds to compute gain. Read more →
- Disqualifying disposition
- An ISO sale that breaks the one- or two-year holding rule, taxing the spread as ordinary income. Read more →
- Double-trigger RSU
- An RSU requiring both time vesting and a liquidity event before shares are delivered. Read more →
- Early exercise
- Exercising options before they vest, receiving restricted shares subject to repurchase. Read more →
- Fair market value (FMV)
- The per-share value used for tax purposes — the 409A price privately, the market price publicly.
- Form 3921
- Informational form reporting ISO exercises, used for AMT and basis. Read more →
- Form 3922
- Informational form reporting ESPP share purchases. Read more →
- Form 6251
- The IRS form on which the alternative minimum tax is computed. Read more →
- Form 8801
- The IRS form used to claim the prior-year minimum tax credit. Read more →
- ISO
- Incentive stock option — an employee-only option with favourable tax treatment and AMT exposure. Read more →
- NSO / NQSO
- Non-qualified stock option — taxed as ordinary income on the spread at exercise. Read more →
- PSU
- Performance share unit — equity that vests on achieving business metrics. Read more →
- QSBS
- Qualified small business stock — Section 1202 stock whose gain may be federally excluded after five years. Read more →
- RSU
- Restricted stock unit — a promise of shares taxed as ordinary income when delivered. Read more →
- Sell to cover
- Selling part of a vesting tranche to fund tax withholding. Read more →
- Spread
- Fair market value minus strike price — the taxable element of an option exercise.
- Strike price
- The fixed per-share price you pay to exercise an option. Read more →
- Tender offer
- A company-sanctioned opportunity to sell private shares to an investor or the company.
- Wash sale
- A disallowed loss caused by acquiring identical stock within 30 days of a loss sale. Read more →