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At Axon Capital Management, we specialize in helping Amazon employees turn equity compensation into long-term wealth. This guide reflects the planning conversations we have every day with clients navigating RSUs, taxes, and major financial decisions.
For many Amazon employees, RSUs dwarf base salary over time, creating life-changing wealth or significant missed opportunities depending on how well you understand and manage them.
Restricted Stock Units (RSUs) are a promise from Amazon to deliver shares once they vest. Unlike stock options, you don't purchase the shares—they're granted to you as compensation and taxed as income at vesting based on their market value. Because the share count is fixed while the price fluctuates, RSUs can meaningfully increase—or decrease—the value of your total compensation over time.
When Amazon extends an offer or awards additional equity, you receive a grant letter specifying the number of RSUs awarded. This number stays constant; if you're granted 100 RSUs and the stock price doubles, your grant becomes worth twice as much.
Amazon uses a back-loaded 4-year vesting schedule designed for retention:
Unlike most tech companies that vest 25% annually, Amazon deliberately concentrates 80% of value in years three and four. This is why walking away at 2.5 years can cost hundreds of thousands of dollars.
New hires receive sign-on bonuses in years one and two to compensate for slower RSU vesting—typically a larger bonus in year one and a smaller one in year two.
With 100 RSUs at $200/share:
Notice how years three and four deliver 80% of total value.
When RSUs vest, their fair market value becomes W-2 income—just like your salary. If you earn $150,000 in base pay and $100,000 worth of RSUs vest, you're taxed on $250,000 total income.
On each vest date, Amazon automatically:
Amazon withholds at the supplemental income rate:
Critical issue: If you're actually in the 32% or 35% tax bracket, the flat 22% withholding creates a shortfall. Large vesting events in years three and four often trigger $10,000–$30,000+ tax bills in April.
Once shares vest, you own them. What happens next:
Important: If shares decline after vesting, you've already paid taxes on the higher vesting value. You can only claim a capital loss when you sell.
Your cost basis—used to calculate future capital gains—is the fair market value on vesting date. Most brokers track this automatically, but verify to avoid overpaying taxes.
Years three and four bring significantly larger vesting amounts. Minimize tax impact by:
Maximize 401(k) contributions: Up to $24,500 annually (2026 limit). These reduce taxable income dollar-for-dollar, saving thousands in high-vesting years.
Contribute to HSA: With a high-deductible health plan, contribute the maximum ($4,150 individual, $8,300 family). Tax-deductible contributions that grow tax-free.
Donor-Advised Funds: Donate appreciated shares for a tax deduction at full market value while avoiding capital gains taxes.
Make estimated tax payments: If you regularly owe money at tax time, make quarterly payments to avoid underpayment penalties and spread the burden throughout the year.
RSUs are taxed based on where you live when they vest, not when granted. Moving from California (13.3% top rate) to Washington (no state income tax) before large vesting events can save tens of thousands. However, California has complex rules about stock compensation earned while a resident—consult a tax professional before relocating for tax purposes.
Financial advisors generally caution against allowing a single stock — particularly your employer’s — to represent a significant portion of your net worth. When both your income and investment exposure are tied to the same company, a downturn could affect your employment and portfolio at the same time, amplifying financial risk.
I discuss this risk in more detail in my Amazon financial planning Q&A.
Some employees choose to hold vested shares based on:
If holding a large concentrated position, consider selling a percentage each quarter rather than all at once. This averages your selling price and reduces timing risk.
High performers receive additional RSU grants at annual reviews. These "refresh grants" follow the same 4-year vesting schedule but start from the new grant date, creating overlapping schedules.
After a few years, you might have:
Review your brokerage account regularly to anticipate large vesting events for tax planning and understand what you'd forfeit by leaving.
By year three, you likely have:
For high performers, forfeiting unvested equity could easily cost $200,000–$400,000+.
Before considering external opportunities, calculate:
A new opportunity needs to compensate for what you're leaving behind. If you have $400,000 unvested with $250,000 requiring 2+ more years, a new job needs to offer at least $125,000 more annually just to break even.
Some companies offer sign-on bonuses or accelerated vesting to compensate for forfeited RSUs. Be transparent about unvested amounts and timing, request multi-year compensation, and get offers in writing before giving notice.
Unvested RSUs: Immediately forfeited when you leave, whether you quit, are terminated, or laid off. No partial vesting or prorating. Exception: Rare negotiated severance packages for senior leaders might include accelerated vesting.
Vested shares: Remain yours. Already-deposited shares in your brokerage account are your property.
Death or disability: Amazon's RSU plan typically includes provisions for accelerated vesting. Review specific plan documents for details.
Not planning for tax bills: Employees spend vested shares without setting aside money for additional taxes, then face surprise bills in April. Assume you'll owe an additional 10-15% beyond withholding if you're high-income or in a high-tax state.
Keeping all Amazon stock: You can love working at Amazon while maintaining a diversified portfolio. Separate investment decisions from employment decisions.
Leaving right before year 3 vesting: Check your exact vesting schedule before making career moves. Waiting a few months to capture a big vest date is sometimes worth hundreds of thousands.
Losing track of cost basis: Download and save vesting confirmations. Verify your broker's cost basis records annually to avoid incorrect tax reporting.
For high performers staying long-term, overlapping vesting schedules create substantial annual equity income. After 5-7 years, RSUs commonly exceed base salary significantly.
Example trajectory:
When shares vest:
Treat RSU vesting as a windfall to invest in your future, not extra spending money.
Treat your RSUs as what they are: a substantial part of your total compensation that deserves the same careful attention as your salary, retirement accounts, and other financial priorities. With proper planning and management, Amazon RSUs can be a cornerstone of long-term financial security and wealth creation.
Consider hiring fiduciary financial advisors specializing in equity compensation when:
If you want to understand how these changes affect your equity, taxes, and long-term strategy, schedule a conversation with a fiduciary financial advisor at Axon Capital Management by filling out the form below.
Article written by Brady Lochte, founder of Axon Capital Management and a fee-only fiduciary financial advisor. Brady is committed to providing clear, transparent financial guidance that helps people navigate retirement, investing, and long-term planning with confidence.
Disclaimer: This guide provides general educational information about Amazon RSUs. It is not personalized financial, tax, or legal advice. Consult with qualified professionals including tax advisors, financial planners, and attorneys who can assess your specific situation before making significant financial decisions.
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