Why the tax bill, the budget, and the portfolio all need to follow the vesting schedule.

For senior Amazon employees with equity compensation.

Executive Summary

Most households plan around a salary: a steady number, taxed as it arrives. Senior pay at Amazon works differently. Stock is reported to make up a large share of it,¹ the first grant is commonly reported to vest mostly in years three and four,² and a cash sign-on bonus paid with regular payroll fills the first two years.^1,3 Income is steady, then lumpy, then dependent on grants that have not been made yet.

That shape has consequences. Withholding on vested shares often runs below the tax actually owed. A budget built on two years of even paychecks has to be rebuilt around a handful of vest dates. A vest can arrive when the employee is not permitted to sell. And each vest adds to a single-stock position that the household may already hold more of than it realizes.

This paper is educational. It predicts nothing about Amazon, its stock, or its future pay decisions. It describes plan features from public sources and, where no public source was found, from our own experience advising Amazon employees, and it says which is which. Either may differ from any individual's grant; your own grant documents control. Sources are listed at the end.

Questions and Answers

How do Amazon RSUs vest for a new hire?

Amazon says most of its employees can become owners through restricted stock units, or RSUs.⁴ For new hires, the schedule is commonly reported as back-weighted: 5% after the first year, 15% after the second, then 20% every six months for the remaining two years.² On that pattern, 80% of the first grant arrives in years three and four. These vests follow the hire date, not the calendar: published offer-letter language places each one on the 15th of the month in which the employment anniversary falls.⁵ In our experience working with Amazon employees, that is a more back-weighted schedule than we generally see elsewhere.⁶ Schedules can differ by role, level and hire date, and your grant agreement states the actual percentages and dates.

Why does my Amazon pay change so much from year to year?

Three parts move on different clocks. Base salary has been reported as capped, with the cap raised from $160,000 to $350,000 in 2022, so salary alone carries a limited share of senior pay.^2,1 The sign-on bonus is reported as a two-year arrangement paid with each paycheck, which in effect makes it extra salary while little stock is vesting.^1,3,5 Stock then takes over. It is reported as a large share of total compensation,¹ and in our experience it is a larger share at senior levels than we generally see at comparable levels at other large technology employers.⁶ Its value depends on the share price on each vest date, so a household can see four different income figures in four years without a raise, a promotion or a job change.

How is an Amazon stock grant sized, and what if the share price falls short?

Press reporting, citing people familiar with the matter, has described Amazon's compensation targets as built on an assumed rate of annual share price growth.⁷ In our experience, that means a grant is sized with the expectation that the shares vesting in later years will be worth more than they were at grant.⁶ If the price grows more slowly than assumed, the back-weighted vests deliver less than the target, and the same reporting described pay running below target after the 2022 decline, with no offsetting RSUs at that time.⁷ In our experience, later refresh grants have at times reflected a lower share price, but those shares vest in future years, so any recovery of the shortfall typically takes several years.⁶ Neither pattern is a commitment about future grants. The planning number is shares multiplied by price on the vest date, not the target on the offer letter.

How are Amazon RSUs taxed when they vest?

Generally, nothing is taxed at grant. IRS Publication 525 says stock received for services that is subject to a substantial risk of forfeiture is included in income when it becomes substantially vested, at its fair market value.⁸ With RSUs, that income is the market value of the shares when they are delivered, which is almost always at vesting, and for U.S. employees it appears on Form W-2 along with the tax withheld.⁹ That vest-date value generally becomes your cost basis, so a later sale is taxed only on the change in price after vesting.⁹ The point people miss is that the tax is owed whether or not you sell: holding vested shares is, in economic terms, the same as receiving cash and choosing to buy the stock that day.

Why do I owe tax in April when Amazon already withheld on my RSUs?

Because the withholding rate and your tax rate are different numbers. IRS Publication 15 sets the withholding rate on supplemental wages at 22%, and at 37% only once supplemental wages paid to an employee during the calendar year exceed $1 million.¹⁰ One advisory firm's published guide describes Amazon vests as withheld at 22%.¹¹ For a married couple filing jointly in 2026, the 32% bracket starts at $403,550 of taxable income, the 35% bracket at $512,450, and the 37% bracket at $768,700.¹² A senior employee in a heavy vesting year can have most of the stock income taxed at 32% to 37% while 22% was withheld.^10,12 The shares withheld or sold at vest to cover tax were a down payment.

How do I avoid an underpayment penalty in a big vesting year?

The IRS generally expects tax to be paid during the year, through withholding or estimated payments.¹³ Under the 2026 Form 1040-ES instructions, estimated tax is generally required if you expect to owe at least $1,000 and expect your withholding and refundable credits to be less than the smaller of 90% of the tax to be shown on your 2026 return or 100% of the tax shown on your 2025 return.¹⁴ If your 2025 adjusted gross income was more than $150,000, 110% replaces 100%.¹⁴ In a rising-income year the prior-year test is usually the easier one to meet, since it is a known number. Publication 505 also describes an annualized income installment method for income that arrives unevenly, and it explains that employees can change withholding by giving their employer a new Form W-4.¹³ Meeting a test avoids the penalty; it does not shrink the balance due in April, so consider the choice of method with your CPA.

What happens if a vest lands when I am not allowed to sell?

Amazon's Insider Trading Guidelines, filed with its annual report, say board members, officers at Level 10 and above and other designated people may trade only during trading windows, which generally begin on the second business day after each quarterly earnings release and run to the end of the third business day of the third month of the quarter.¹⁵ Because new-hire vests follow the hire date,⁵ in our experience a vest can land outside an open window,⁶ and the income is taxed at vest regardless,⁸ so an employee who cannot sell holds the shares and owes whatever tax withholding did not cover. A Rule 10b5-1 plan, a written arrangement to sell on preset terms, is the usual answer, and it has to be in place early. The SEC's fact sheet on its amended rule describes a cooling-off period for directors and officers of 90 days after adoption or modification, which can extend to as long as 120 days, and of 30 days for other persons, before any trading can begin.¹⁶ Whether restrictions apply to you is a question for Amazon's guidelines and its legal department, not for this paper.

Can I borrow against my shares instead of selling?

A securities-backed line of credit, a loan that uses securities held in an investment account as collateral, is one way to raise cash without a sale.¹⁷ In our experience, holders of concentrated vested shares sometimes consider one as a short bridge, for example to pay the tax on an off-cycle vest when the next trading window is a few weeks away, or during a volatile stretch.⁶ It is debt, not income: the rate is typically variable and can change daily, the proceeds may not be used to purchase or trade securities, and the lender may call the loan at any time.^17,18 If the collateral falls in value, the lender can issue a maintenance call and, if it is not met, sell the securities, which can create capital gains tax, and regulators warn that a portfolio concentrated in one stock can drop sharply on a single market event and trigger that call.^17,18 Amazon's guidelines add their own limit: board members, Section 16 officers and employees at Level 11 or above, and people in their households, may not hold Amazon securities on margin or pledge them as collateral for a loan unless the arrangement is precleared with the Legal Department.¹⁵ Read the current policy and obtain any required preclearance before borrowing against company shares, and consider the terms with your CPA and your lender.

Which deductions make the most sense in a high-income vesting year?

A deduction is worth your marginal rate, so the same gift or contribution saves more in a year taxed at 35% than in a year taxed at 24%.¹² That is the case for bunching: grouping several years of planned charitable giving into the peak year, often through a donor-advised account, and taking the standard deduction in the lighter years. The 2026 rules add two limits worth knowing. Charitable deductions now count only above 0.5% of adjusted gross income, and the benefit in the top bracket is capped at 35 cents per dollar, both covered in our companion paper "Give the Shares, Keep the Cash."¹⁹ Giving appreciated shares held more than a year, instead of cash, is the usual refinement.¹⁹ The trade-off is real: bunched gifts are irrevocable, and they belong in a year when cash flow can absorb them.

What happens to my Amazon pay after year four?

Refresh grants take over: published guides describe refresh grants as additional RSUs awarded around annual performance reviews,²⁰ and in our experience, once the new-hire grant is complete, they carry the stock portion of pay and vest on a company calendar instead of the hire date: on the 15th or the 21st of February, May, August and November.⁶ Published guides name the same four months, though some describe vesting only in May and November for certain grants or levels, so the frequency in your own grant controls.^20,21 Amazon has also said it makes stock grants at promotion,² and in our experience these can be large one-time awards that vest three to four years out, which strengthens the pull to stay.⁶ All of these grants are sized by the company, and Amazon has publicly described reducing planned awards for a future year and re-evaluating to plan for stock variation.²² If later grants are smaller than the last two years of the first grant, total pay falls, and that cliff mostly surprises households that set a mortgage and tuition against the peak year.

How should I budget when my income is this uneven?

The first two years are the easy ones: a sign-on bonus paid with each paycheck makes monthly cash flow high and even,³ which in our experience makes it simple to hold a budget and to spread 401(k) contributions across the year.⁶ When the bonus ends, more of the year's pay arrives on a few vest dates, and the monthly paycheck drops back toward base salary. A common approach is to set spending at a level the household could sustain on salary plus a conservative share of expected vests, then give every vest a job before it lands: the tax gap first, then reserves, then long-term goals. Retirement plan deferrals deserve a specific look in that transition, since they come out of paychecks that are now smaller. No formula fits every household; the discipline is to decide the number before the vest arrives.

Should I sell my Amazon RSUs when they vest or hold them?

This paper does not recommend buying, selling or holding any security. It can describe the mechanics. Because basis is generally set at vest, selling promptly usually produces little additional gain or loss,⁹ while holding makes the position larger with each vest and ties more of the household's net worth to the company that pays its salary. The holding period begins when the shares vest, and a gain on shares held more than one year is generally long-term;^8,23 waiting also leaves the position exposed to price changes in both directions. Ways of managing a position that has already grown fall into categories such as scheduled selling plans, direct indexing, exchange funds, option-based hedges and charitable vehicles, each with costs, limits and eligibility rules. One limit is Amazon's own: its guidelines prohibit hedging and derivative transactions in Amazon securities for board members, Section 16 officers and employees at Level 11 and above, and require legal preclearance for other employees.¹⁵

I own index funds. Am I diversified away from Amazon?

Less than most people assume. Broad market index funds weight companies by size, and our companion paper "The Concentration You Bought Back" lists Amazon among the ten largest companies in the S&P 500 as of September 22, 2026, a group that made up about 40% of the index on that date.²⁴ An Amazon employee who sells vested shares and buys an S&P 500 fund has reduced the position, and has also bought a slice of it back. Total exposure is the sum of unvested RSUs, vested shares, and the Amazon weight inside every fund in every account. In our experience Amazon does not offer an employee stock purchase plan, so for most employees there is no fourth source to count.⁶

Does Washington tax me when I sell Amazon stock?

Washington does not currently have an individual income tax, so the vest itself carries no state income tax for a Washington resident.²⁵ A later sale is different. The state imposes a 7% excise tax on long-term capital gains above an annual standard deduction, which was $278,000 for 2025 and is adjusted for inflation each year,²⁶ and since tax year 2025 gains above $1 million carry an additional 2.9%, for a combined 9.9%.²⁷ Federally, capital losses offset capital gains, plus up to $3,000 a year of other income.²⁸ Washington has also enacted a 9.9% tax on adjusted gross income above $1 million beginning January 1, 2028;²⁵ a lawsuit challenging it was filed on April 9, 2026, so how it will finally apply is uncertain.²⁹ California is a separate matter: for RSUs earned partly in that state, its Franchise Tax Board allocates the income by California workdays over total workdays from grant date to vesting date,³⁰ so anyone who has moved between the two states should review that allocation with a CPA.

A Worked Hypothetical

Hypothetical, for illustration only. This does not describe any actual person, offer or grant, and the share price used is an assumption for arithmetic, not Amazon's actual price or a forecast.

A married couple files jointly and lives in the Seattle area. One spouse joins Amazon in a senior role on January 2, 2024; the other has no earned income. Assumptions: base salary of $300,000, unchanged; a new-hire grant of 8,000 RSUs; a constant share price of $200 at every vest; a sign-on bonus of $350,000 for the first year and $280,000 for the second, paid evenly with payroll. The new-hire grant vests 5% in January 2025, 15% in January 2026, and 20% in each of July 2026, January 2027, July 2027 and January 2028. An assumed refresh grant then vests 200 shares in each of February, May, August and November of 2028 and 2029. The refresh figure is a placeholder, since later grants are not predictable.

Table 1: Income by Calendar Year (Hypothetical, for Illustration Only)

Two things stand out before any tax is computed. In 2024 and 2025, about $54,000 and $48,000 a month arrives through payroll. In 2026 payroll carries $25,000 a month and $560,000 arrives on two dates. And because vests follow the hire anniversary, the first-year vest falls in the second calendar year, so the calendar never matches the offer letter's "year one, year two" framing.

Now take 2026, the couple's third calendar year. Assume no other income, the $32,200 standard deduction for 2026,¹² and withholding on salary that happens to equal the tax salary alone would produce. Social Security, Medicare and the additional Medicare tax are ignored.

Table 2: The 2026 Gap — the Couple's Third Calendar Year (Hypothetical, for Illustration Only)

The RSU income is taxed at an average of about 32.0% because it stacks on top of salary, across the 24%, 32%, 35% and 37% brackets.¹² Withholding covered 22%.¹⁰ The difference, about $55,800, is due with the return unless it is paid during the year. On these facts the couple's total withholding of $172,668 is also below 90% of the year's tax ($205,605), so the penalty question from earlier is live.¹⁴ From 2027 to 2029, income falls by $480,000. Every step is shown in the Calculation Notes.

One more point about the flat price. Press reporting has described Amazon's targets as assuming annual share price growth,⁷ and a grant sized that way contains fewer shares than a flat price would need to reach the same target. At a constant $200, then, every vest in this table is worth less than the target it was meant to deliver, and the shortfall is largest in 2026 through 2028, when 95% of the shares vest. The table shows what arrives. It says nothing about what the price will do.

Final Thoughts

The usual question is "what is my total compensation?" It produces one number, and the number is an average of years that look nothing alike. The households that handle this pay structure well tend to plan year by year: what vests and when, whether it can be sold, what is withheld, what is owed, what gets spent, and what the position looks like afterward.

None of that requires a view on the stock. It requires the schedule in your grant documents and some arithmetic. The better question is this: in which year does each dollar arrive, and what was that dollar supposed to do?

Prefer to just keep reading? Reply "subscribe" to the email that brought you here and we'll send new papers as they are published.

Sources

1. SHRM, Stephen Miller, "Amazon Doubles Base Pay Cap for Corporate Staff to Stay Competitive," February 11, 2022.
2. Forbes, Bruce Brumberg, "Amazon, Apple, Google: Restricted Stock Grants Evolve To Retain Top Talent," February 8, 2022.
3. Avier Wealth Advisors, Lars Phillips, "How Does Compensation Work at Amazon?" May 17, 2022. (Secondary source, an advisory firm's published guide.)
4. Amazon.jobs, "Benefits: U.S. Employees," accessed October 6, 2026.
5. Rora, Sameer Siddiqi, "Amazon salary negotiation," September 3, 2022. (Secondary source, a compensation negotiation firm quoting offer-letter language.)
6. Ascent Wealth Solutions. Author's professional observations from advising Amazon employees; not independently verified and may not reflect any individual's grant.
7. Fortune, Eleanor Pringle, "Amazon staff might get paid 50% less than what they were expecting because shares in the online giant have fallen so much," February 21, 2023, citing reporting by The Wall Street Journal.
8. Internal Revenue Service, Publication 525 (2025), "Taxable and Nontaxable Income," section "Restricted Property."
9. Charles Schwab, Equity Award Center, Matt Simon, "RSUs: Essential Facts," accessed October 6, 2026.
10. Internal Revenue Service, Publication 15 (2026), "(Circular E), Employer's Tax Guide."
11. Avier Wealth Advisors, "Amazon's RSU," accessed October 6, 2026. (Secondary source, an advisory firm's published guide.)
12. Internal Revenue Service, News Release IR-2025-103, "IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill," October 9, 2025.
13. Internal Revenue Service, Publication 505 (2026), "Tax Withholding and Estimated Tax."
14. Internal Revenue Service, Form 1040-ES (2026), "Estimated Tax for Individuals," instructions, "General Rule" and "Higher income taxpayers."
15. Amazon.com, Inc., "Insider Trading Guidelines," Exhibit 19.1 to Form 10-K for fiscal year 2024.
16. U.S. Securities and Exchange Commission, "Fact Sheet. Rule 10b5-1: Insider Trading Arrangements and Related Disclosure" (Release No. 33-11138).
17. FINRA, "Securities-Backed Lines of Credit Explained," January 3, 2024.
18. U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, and FINRA, "Investor Alert: Securities-Backed Lines of Credit," December 21, 2015.
19. Ascent Wealth Solutions, "Give the Shares, Keep the Cash," 2026.
20. AdvisorFinder, Drew Keever, "Amazon Stock Compensation Guide: RSUs, Vesting & Trends," October 2, 2025. (Secondary source.)
21. TrueWealth Financial Partners, "How Your Amazon RSUs Work: Vesting, Taxes, Tips, & More," accessed October 6, 2026. (Secondary source.)
22. Reuters, "Amazon plans to trim employee stock awards amid tough economy," April 6, 2023, as republished by FX Empire.
23. Internal Revenue Service, Topic No. 409, "Capital gains and losses."
24. Ascent Wealth Solutions, "The Concentration You Bought Back," 2026.
25. Washington State Department of Revenue, "Income tax," accessed October 6, 2026.
26. Washington State Department of Revenue, "Capital gains tax," accessed October 6, 2026.
27. Washington State Department of Revenue, Special Notice, "New tiered rates for Washington's capital gains tax," June 30, 2025.
28. 26 U.S.C. § 1211(b), "Limitation on capital losses," Legal Information Institute, Cornell Law School.
29. Axios Seattle, Melissa Santos, "Washington 'millionaires' tax hit with lawsuit," April 9, 2026.
30. California Franchise Tax Board, Publication 1004, "Equity-Based Compensation Guidelines" (rev. 01/2015).

Calculation Notes

All figures are hypothetical and for illustration only.

Assumptions. Married filing jointly; Washington residents; one earner; no other income, no pre-tax deferrals, no itemized deductions; 2026 standard deduction of $32,200 and 2026 brackets. Hire date January 2, 2024. Salary $300,000 in all years. Sign-on bonus of $350,000 paid evenly with payroll over the first twelve months and $280,000 over the second twelve months; because the hire date is January 2, these are treated as falling entirely in calendar 2024 and 2025. New-hire grant of 8,000 RSUs at an assumed constant $200 per share, a total of $1,600,000, vesting on the hire-date pattern: 5% in the month of the first anniversary, 15% in the month of the second, then 20% every six months. Assumed refresh grant vesting 200 shares in each of February, May, August and November of 2028 and 2029; this is an assumption, not a description of any Amazon grant. Payroll taxes (Social Security, Medicare, additional Medicare tax) are ignored. Withholding on salary is assumed to equal the tax on salary alone. RSU withholding is at the 22% rate because supplemental wages stay below $1,000,000.

Step 1. New-hire vests by date and calendar year. January 2025: 5% × 8,000 = 400 shares × $200 = $80,000. Calendar 2025 total: $80,000. January 2026: 15% × 8,000 = 1,200 shares × $200 = $240,000. July 2026: 20% × 8,000 = 1,600 shares × $200 = $320,000. Calendar 2026 total: $240,000 + $320,000 = $560,000 (35%). January 2027: 1,600 shares × $200 = $320,000. July 2027: 1,600 shares × $200 = $320,000. Calendar 2027 total: $640,000 (40%). January 2028: 1,600 shares × $200 = $320,000. Calendar 2028 total: $320,000 (20%). Check: $80,000 + $560,000 + $640,000 + $320,000 = $1,600,000. Shares vesting 2026 through 2028: 35% + 40% + 20% = 95%.

Step 2. Refresh vests. 2028: 4 × 200 shares × $200 = $160,000. 2029: 4 × 200 shares × $200 = $160,000.

Step 3. Total income by calendar year. 2024: $300,000 + $350,000 = $650,000. 2025: $300,000 + $280,000 + $80,000 = $660,000. 2026: $300,000 + $560,000 = $860,000. 2027: $300,000 + $640,000 = $940,000. 2028: $300,000 + $320,000 + $160,000 = $780,000. 2029: $300,000 + $160,000 = $460,000. Change from 2027: $940,000 − $460,000 = $480,000.

Step 4. Monthly payroll cash, before tax. 2024: ($300,000 + $350,000) ÷ 12 = $54,167. 2025: ($300,000 + $280,000) ÷ 12 = $48,333. 2026: $300,000 ÷ 12 = $25,000.

Step 5. 2026 taxable income. $860,000 − $32,200 = $827,800.

Step 6. 2026 federal income tax at 2026 brackets

Total shown as $228,451.

Step 7. Tax on salary alone. Taxable income $300,000 − $32,200 = $267,800. $2,480.00 + $9,120.00 + $24,332.00 + 24% × ($267,800 − $211,400 = $56,400) = $13,536.00. Total: $49,468.00.

Step 8. Tax added by RSU income. $228,450.50 − $49,468.00 = $178,982.50, shown as $178,983. As a share of RSU income: $178,982.50 ÷ $560,000 = 32.0%.

Step 9. RSU withholding. 22% × $560,000 = $123,200.00.

Step 10. Gap. $178,982.50 − $123,200.00 = $55,782.50, shown as $55,783.

Step 11. Safe-harbor comparison. Total withholding: $49,468.00 + $123,200.00 = $172,668.00. 90% of 2026 tax: 0.90 × $228,450.50 = $205,605.45. Withholding is $32,937.45 below that test. The prior-year test (110% of the tax shown on the 2025 return) is not computed here because it depends on a 2025 return under 2025 brackets.

Flat-price paragraph. No figure is computed. The statement is directional: for a fixed dollar target, a grant sized on a rising assumed price contains fewer shares than one sized on a flat price, so at a flat price each vest is worth less than its target.

IMPORTANT DISCLOSURES

This paper is intended for educational purposes and does not constitute tax, legal, or investment advice. Individual circumstances vary significantly. Please consult with a qualified tax or financial professional before making decisions. Hypothetical examples are for illustration only, do not represent any actual person, grant or outcome, and rely on assumptions that may not match your situation. Ascent Wealth Solutions is not affiliated with or endorsed by Amazon. Compensation plan features described here are drawn from public reports and, where identified, from the author's professional observations, which have not been independently verified; they may change and may not match any individual's grant. Your own grant documents control. Third-party information is believed to be reliable but has not been independently verified. Amazon is named only to describe compensation features, and nothing in this paper is a recommendation to buy, sell or hold any security. Tax rules are described as understood in October 2026 and are subject to change. Investing involves risk, including the possible loss of principal. Securities-backed lending involves risk, including the forced liquidation of pledged collateral, and is not suitable for everyone. Diversification does not ensure a profit or protect against loss. Securities and Investment Advisory Services are offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Osaic Wealth does not offer tax or legal advice.