Why a single-year view falls short
A typical tax return looks backward at one year. A typical year-end planning meeting looks at the current year and maybe the next. For someone whose income includes RSUs, stock options, ESPP shares, and planned stock sales, that window is too narrow.
The tax system is built on thresholds. Ordinary income brackets, long-term capital gains rates, the 3.8% net investment income tax, the additional Medicare tax, and the alternative minimum tax all apply above certain income levels. Income that lands in one year can cross several of them at once. The same income spread across years might cross fewer.
What goes into the projection
- Known events. RSU vesting schedules, scheduled ESPP purchases, option expiration dates, and bonuses.
- Decisions you control. Option exercises, stock sales, Roth conversions, and the timing of charitable gifts.
- Life changes. A planned retirement, a job change, a move to another state, or a liquidity event.
- Carryforwards. AMT credits, capital losses, and charitable deduction carryovers from earlier years.
- Estimated payments. What has been withheld and paid compared with what each year will likely owe.
The projection then shows, year by year, your estimated taxable income, the rates that apply at the margin, and where the thresholds fall. It is an estimate built on assumptions, including future tax law and the stock price, so it gets updated as those change.
The decisions it informs
Option exercises
Non-qualified option exercises create ordinary income in the year of exercise. ISO exercises can create AMT exposure. Knowing how much room each year has helps size the exercise. See our posts on NQSO exercise methods and ISOs when you leave a company.
Stock sales
A diversification plan that spreads sales across calendar years can keep more gains in lower capital gains brackets or below surtax thresholds than one large sale. The projection shows how much to sell in each year. Insiders often carry out the result through a 10b5-1 plan.
Charitable giving
Gifts of appreciated stock tend to be most valuable in high-income years. Some families "bunch" several years of giving into one year through a donor-advised fund, timed to a large vest or sale.
Roth conversions
Lower-income years, such as the gap between leaving a job and claiming Social Security, can be good years to convert traditional IRA money to Roth. The projection identifies those years in advance.
State taxes after a move
Florida has no state income tax, but moving here does not always end your old state's claim. Some states tax equity compensation earned while you worked there, even if it vests or is exercised after you leave. The projection should allocate that income correctly.
A hypothetical four-year map
Hypothetical example: Meet "Elena," a senior director at a public company planning to retire in three years. Her projection lays out each year side by side: large RSU vests in years one and two, an NQSO grant expiring in year three, retirement partway through year three, and little earned income in year four. Seen together, the pattern suggests exercising the NQSOs in year two rather than in the high-income final year, shifting most stock sales toward year four, and making a large donor-advised fund gift in year one. A single-year view would have shown none of this.
Avoiding surprises in April
Withholding on vests and exercises is often at a flat supplemental rate that can fall short of your actual rate. A projection shows the gap early, so you can adjust withholding or make estimated payments, rather than discover it when the return is filed. Safe-harbor rules based on the prior year's tax can help avoid underpayment penalties, but they do not reduce the tax itself.
Who does what
We build and maintain the projection as part of financial planning and use it to time decisions. Your CPA prepares and files the returns and confirms the technical treatment. The work goes more smoothly when both start from the same numbers, which is why we share the projection with your CPA each year. Our post on what to give your CPA covers the documents that matter.
Common mistakes
- Making exercise and sale decisions in December, after most of the year's income is fixed.
- Treating the projection as a forecast instead of a tool that gets updated.
- Ignoring carryforwards such as AMT credits and capital losses.
- Forgetting that a former state may still tax equity earned there.
- Planning taxes and investments separately.
Important: Skyview Financial Group does not prepare or file tax returns or provide legal advice. Projections are estimates based on assumptions that may not hold, including future tax law and market prices. We coordinate with your CPA, who prepares your returns.
Related: our tax-aware strategies and our equity compensation planning.
Disclosure: Skyview Financial Group, LLC is an SEC-registered investment adviser (CRD #310581). This content is educational only and is not individualized tax, legal, or investment advice. Skyview Financial Group does not prepare or file tax returns. Figures and rules cited are current as of October 2026 and subject to change; please consult your CPA and, where applicable, legal counsel. Examples are hypothetical and do not reflect any specific client.