Selling RSUs: tax implications
Capital gains tax on RSU sales, holding periods, and strategies for minimizing tax impact.
- •RSUs are taxed at your marginal income tax rate (not capital gains rate). Your employer typically withholds 22% federal (or 37% if over $1M) plus state tax and FICA.
- •You typically receive 60-75% of RSU value after taxes, depending on your tax bracket and state.
- •Withholding on RSUs may not match your final tax liability—you'll reconcile this when you file your return.
Tax on RSU sales
When you sell RSUs, you may owe capital gains tax on any appreciation since vesting. The tax rate depends on how long you held the shares:
The cost basis for calculating gains is the fair market value when the RSUs vested. If you sell immediately after vesting, you typically have little to no capital gains.
- Short-term capital gains: If you sell within one year of vesting, gains are taxed as ordinary income (same as your income tax rate)
- Long-term capital gains: If you hold for more than one year, gains are taxed at preferential rates (0%, 15%, or 20% depending on income)
Selling strategies
There are two main approaches to selling RSUs:
Diversification
- Sell immediately: Minimizes risk and capital gains tax, but you miss out on potential appreciation. Good for diversification.
- Hold for long-term: Potential for lower capital gains rates, but increases concentration risk in a single stock.
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Tax-loss harvesting
If your RSU shares decline in value after vesting, you can sell them at a loss to offset capital gains from other investments. This strategy, called tax-loss harvesting, can reduce your overall tax liability.
Be aware of the wash-sale rule: if you buy the same stock within 30 days before or after selling at a loss, you can't claim the loss for tax purposes.
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