Equity compensation
Amazon RSUs, not stock options: your choices for building wealth
People search for "Amazon stock options for employees," but Amazon does not grant stock options to its workforce. It grants restricted stock units, and the difference changes how you are taxed and what decisions you face. This page explains the distinction, then works through the choices that arrive with every vest: sell or hold, cost basis, reducing a concentrated position, Rule 10b5-1 plans, and how Amazon's own insider trading rules shape timing. For the rest of the package, see the Amazon benefits guide and the Amazon money guides hub.
Amazon grants RSUs, not stock options
Amazon's 2025 proxy statement describes restricted stock units as "our primary form of stock-based compensation since 2002," and its 2024 annual report says "We utilize restricted stock units as our primary vehicle for equity compensation." Amazon still maintains a 1999 Nonofficer Employee Stock Option Plan, but the proxy notes that RSUs are not granted from it, and employee compensation today runs through RSUs. Amazon also has no employee stock purchase plan. When a recruiter talks about your "stock," the instrument is an RSU; the Amazon RSU vesting and tax guide covers the schedule it vests on.
How RSUs and stock options differ
A stock option is the right to buy a share at a fixed strike price for a period of years. It is worth something only if the share price rises above the strike, and you choose when to exercise, which gives you control over the timing of the tax. An RSU is a promise to deliver a share on a vesting date. It is worth whatever the share is worth that day, it cannot go underwater, and you have no control over when the tax hits: it hits at vest.
| Feature | Stock option | Restricted stock unit (what Amazon grants) |
|---|---|---|
| What you receive | Right to buy shares at a set strike price | Shares delivered on each vest date, no payment required |
| Value if the stock falls | Can be worthless if price is below strike | Still worth the current share price |
| When tax is triggered | At exercise (nonqualified) or at sale (incentive stock options, with AMT exposure) | At vest, as ordinary wages |
| Control over timing | You choose when to exercise | None; the schedule decides |
| Tax forms | Form 3921 for ISO exercises; W-2 for NQSO spread | W-2 at vest; Form 1099-B when sold |
The RSU rule comes from the IRS restricted property rules in Publication 525: stock subject to a substantial risk of forfeiture is not income "until it becomes substantially vested," and then its fair market value is wages and becomes your cost basis. Amazon's plan administrator, Morgan Stanley at Work, sells shares to cover withholding by default (Morgan Stanley's Amazon guide), with the federal portion withheld at the 22% supplemental rate, or 37% once your supplemental wages for the year pass $1 million (IRS Publication 15). Our RSU taxes guide explains why 22% is usually too little.
The sell-at-vest default
Here is the piece most new Amazon employees do not expect: selling on the day shares vest costs almost nothing in extra tax. The income tax was triggered by the vest, whether you sell or not. Your basis is the vest-date price, so a same-day sale produces a capital gain or loss of roughly zero. Holding does not avoid the tax already owed; it adds a second bet on top of it.
That is why "sell at vest, then decide what to buy" is the default recommendation. If, with cash in hand, you would happily buy Amazon shares, you can; most people would not put the whole amount into their employer, and the default removes inertia. Morgan Stanley at Work's "sell all shares" election in the Amazon stock plan account automates this, with US dollar proceeds paid two business days after the trade; make the election at least one day before the vest.
Concentration risk
Your finances are heavily exposed to Amazon before you hold a single vested share. Your salary depends on Amazon. Your unvested RSUs, reported to be 80% of a new-hire grant through the end of year two, depend on Amazon's share price. Your sign-on installments depend on staying, and your 401(k) match depends on reaching the three-year cliff. Every vested share you keep stacks more of the same risk on that pile.
The stock does not need to collapse for this to hurt. A flat or declining share price coincides with the period when layoffs and smaller refresh grants are most likely. Diversifying vested shares does not cost you the upside if Amazon does well, because unvested grants and your career still capture it; it limits the damage if Amazon does badly. The planning guide for high earners discusses sizing a single stock against a portfolio.
Tax lots, cost basis, and holding periods
If you hold past vest, each vest creates a separate tax lot with its own basis (the vest-date price) and acquisition date. Two IRS rules matter:
- Holding period. A gain is long-term if you hold more than one year; otherwise it is short-term and taxed as ordinary income (IRS Topic 409). Long-term rates are 0%, 15%, or 20% depending on taxable income, and high earners may owe the 3.8% net investment income tax above $200,000 of modified adjusted gross income (single) or $250,000 (married filing jointly) (IRS Topic 559).
- Broker-reported basis is often wrong. Under the Form 1099-B instructions, a broker "cannot increase initial basis for income recognized" on equity compensation granted after 2013, so when you sell RSU shares the 1099-B often shows a $0 basis and the full sale price as gain. Fix it on Form 8949 with adjustment code B, using the vest-date value from your W-2 or the broker's supplemental statement. Our E*TRADE RSU vesting guide walks through it.
When you sell part of a position, choose the lots. Selling the highest-basis lots minimizes gain; selling lots held more than a year avoids short-term rates. Morgan Stanley's account lets you set the priority of lots at the time of sale (how to sell shares guide). Keep your own record of every vest, with date, share count, and price, so you can defend the basis if a 1099-B is wrong.
Diversification paths: index funds, exchange funds, donor-advised funds
Index funds
The simplest route is to sell vested shares and buy broad, low-cost index funds. For shares sold at vest the tax cost is nil. For shares held for years at a large gain, a 15% or 20% tax on the gain is a known, bounded cost of getting diversified, while the loss from a single stock is not. A practical approach: sell new vests immediately and sell appreciated older lots over two or three tax years to manage brackets.
Exchange funds
An exchange fund pools concentrated positions from many investors into a partnership; each contributor swaps a single stock for a share of the diversified pool without a sale. The deferral rests on partnership tax rules: Internal Revenue Code section 704(c)(1)(B) taxes the contributor if the contributed stock is distributed to another partner within seven years, which is why these funds impose roughly seven-year lock-ups, and the fund must avoid being treated as an investment company, a test tied to having more than 80% of assets in marketable securities (Treasury Regulation 1.351-1(c)), which is why they also hold assets such as real estate. They are typically limited to high-net-worth investors and carry fees and illiquidity. One Amazon-specific point: Amazon's Insider Trading Guidelines prohibit directors, Section 16 officers, and employees at Level 11 or above from entering an exchange fund involving Amazon securities, and require everyone else to preclear one with the Legal Department.
Donor-advised funds
If you give to charity anyway, give appreciated shares instead of cash. A donor-advised fund is "a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization" in which the donor "retains advisory privileges with respect to the distribution of funds" (IRS). Contributing shares held more than one year generally lets you deduct full fair market value, subject to a 30% of adjusted gross income limit for capital gain property given to public charities (IRS Publication 526), and the embedded gain is never taxed. You then grant to charities from the fund over years. It is the most tax-efficient way to shrink a low-basis Amazon position if you are charitably inclined; it does not put cash in your pocket.
Rule 10b5-1 plans and Amazon's trading windows
Amazon's insider trading guidelines, filed as Exhibit 19.1 to its 2024 annual report, apply to all employees. Everyone is barred from trading while holding material nonpublic information. A narrower group, directors, officers at Level 10 and above, and others named by the Legal Department, may trade only during announced windows, which "generally begin on the second business day after each release of quarterly earnings and extend until the end of the third business day of the third month of each quarter." The guidelines count sales of shares from RSU vesting, changes to sell-all or tax elections, and entering or amending a Rule 10b5-1 plan as covered trading, and employees not subject to the window are "encouraged to restrict your trading to the trading window periods."
A Rule 10b5-1 plan is a written, pre-arranged schedule of trades adopted when you have no inside information, which then executes automatically even during closed windows. Under the SEC's 2022 amendments (17 CFR 240.10b5-1), directors and officers must wait until the later of 90 days after adopting the plan or two business days after the next quarterly results are filed, capped at 120 days; everyone else waits 30 days. The plan must be entered into and operated in good faith, and overlapping plans are restricted (SEC press release). For an Amazon employee restricted to trading windows, a plan that sells a fixed number of shares at each vest implements sell-at-vest without blackout worries; for everyone else, the standing sell-all election does the same job more simply.
Common mistakes
- Treating RSUs like options. There is no strike price to wait for and no exercise decision. The tax hits at vest whether you act or not.
- Holding by default. Not selling is a decision to buy more Amazon with the after-tax value of each vest. Make it on purpose or not at all.
- Accepting a $0 basis on the 1099-B. That taxes shares twice. Adjust on Form 8949.
- Waiting for long-term treatment on a vest-date sale. There is essentially no gain to convert; the holding period only matters for shares you chose to keep.
- Trading in a closed window. If you are on the restricted list, selling shares or changing a sell-all election outside the window is a policy violation.
- Letting refresh grants stack silently. Revisit the plan every year.
Bottom line. Amazon pays in RSUs, so the tax is settled at vest and the real decision is what to own afterward. Sell at vest by default and buy diversified funds; if you already hold a large appreciated position, spread sales across tax years, give the lowest-basis lots through a donor-advised fund, and consider an exchange fund only if you qualify and are not barred by Amazon's policy. If you are subject to trading windows, a 10b5-1 plan makes the default automatic.
Grant terms, trading-window lists, and plan features change. Confirm your schedule and elections in the Morgan Stanley at Work portal, check with the Legal Department whether you are on a trading-window or preclearance list, and verify holding-period and basis rules in the current IRS publications before you sell.