Author Topic: Which RSUs to sell  (Read 175 times)

bender

  • Bristles
  • ***
  • Posts: 461
Which RSUs to sell
« on: March 09, 2017, 04:03:51 PM »
I've been letting my RSUs accumulate the last few years, opting to "sell to cover" and hold the rest. 

I think I have enough held in one stock (particularly enough in my own employer's stock), so I want to diversify some of this to other investments. 

I expect I'll owe 15+3.8%=18.8% long term gain taxes.

Questions:
1. Is there any difference between 1 year and 5 year long term gains?
2. Are there any other stealth taxes here?

I'm leaning towards selling recently vested stock instead of the long term to minimize taxes.  This would be very small short term gains or even small losses.  Does this make the most sense (avoid taxes now)?  Seems obvious now that I wrote it down...

MustacheAndaHalf

  • Pencil Stache
  • ****
  • Posts: 840
Re: Which RSUs to sell
« Reply #1 on: March 09, 2017, 06:08:22 PM »
I've always glanced at the 5 year holding periods and found they didn't apply, and so ignored them - can't help if those apply to you.

To be clear, when you sell to cover an RSU, you get shares.  So you're no longer dealing with RSUs, but with shares held in a brokerage account.  Of those shares, selling those at a loss makes the most sense.  The IRS "shares the loss" with you.  So if you lose $300, in the 33% bracket the IRS will absorb $100 of the loss.

Next up would be picking from those shares held 366 days or more.  Pick the lowest gain that also fits in the long-term capital gains rate.  You save by picking a smaller gain, and by limiting to the better tax rate.

Note you don't have to "sell to cover".  You can just sell, and use the profit to invest elsewhere, like in an S&P 500 fund.  That way your profit grows diversified, instead of in company stock.