Donor Advised Fund for RSUs

[Tdub]

I’m thinking of opening my first donor advised fund this year. I ran out of other ways to offset my tax bill with tax advantaged accounts (already doing everything up to mega back door). I want to give away a lot of money eventually, and I might as well start ear marking it for charity now while I’m in a high tax bracket.

Logistically, how do I donate my RSU grants? Usually a big chunk is automatically extracted for taxes. I never see that portion. The advantage of donating stocks to a DAF is that the tax bill is avoided, but how do I bypass the automatic tax withdrawal for RSUs?

[protostache]

Typically you can't transfer RSUs until they vest into actual shares. I would recommend chatting with someone at Fidelity Charitable about it. They might be able to give you some pointers on how to talk to HR about accomplishing what you want to do.

[seattlecyclone]

You generally won't be able to donate the shares until they vest.

In case you aren't aware, donating shares only lets you avoid any long-term capital gains taxes on those shares. This can be a great move if you intend to donate to charity anyway and you have some shares that have increased in value by a significant amount since you acquired them. But for RSU shares that recently vested, any capital gains at this point will be minimal. Donating new shares will be about the same tax-wise as selling the shares and donating cash.

[Tdub]

You generally won't be able to donate the shares until they vest.

In case you aren't aware, donating shares only lets you avoid any long-term capital gains taxes on those shares. This can be a great move if you intend to donate to charity anyway and you have some shares that have increased in value by a significant amount since you acquired them. But for RSU shares that recently vested, any capital gains at this point will be minimal. Donating new shares will be about the same tax-wise as selling the shares and donating cash.

Ah ok, this is a little different than I was thinking.

Let say I have a $10k grant that vests in April, which has grown to $11k, and $3k is automatically taken out for taxes.  Is there no way for me to donate the entire $11k (pre-tax)?  Only the $1k gains will be tax-free for a DAF?

Cost basis is $0 because I got the grants for free.

If this is the case, I probably won't donate any RSUs.  Maybe I'll just donate index funds in existing taxable accounts that already have high capital gains.

[Paul der Krake]

You can always donate the whole amount, but it is no different than donating cash and taking the deduction, provided you itemize.

[seattlecyclone]

You generally won't be able to donate the shares until they vest.

In case you aren't aware, donating shares only lets you avoid any long-term capital gains taxes on those shares. This can be a great move if you intend to donate to charity anyway and you have some shares that have increased in value by a significant amount since you acquired them. But for RSU shares that recently vested, any capital gains at this point will be minimal. Donating new shares will be about the same tax-wise as selling the shares and donating cash.

Ah ok, this is a little different than I was thinking.

Let say I have a $10k grant that vests in April, which has grown to $11k, and $3k is automatically taken out for taxes.  Is there no way for me to donate the entire $11k (pre-tax)?  Only the $1k gains will be tax-free for a DAF?

Cost basis is $0 because I got the grants for free.

No, it probably isn't. Stock grants generally take on a cost basis equal to their fair market value on their vest date. This value counts as W-2 income and has tax withheld from it accordingly. If you sell the same day, you will have essentially zero capital gains; you were already taxed on the fair market value of the shares the instant they vested, any capital gain or loss will just be from any change in value between the vest date and the time you sold the shares.

If this is the case, I probably won't donate any RSUs.  Maybe I'll just donate index funds in existing taxable accounts that already have high capital gains.

Yes, this is a better move. Donate your most appreciated shares, whatever they are.

[Tdub]

Makes sense now - thanks everyone!