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If you sell immediately after your stocks vest, do you pay capital gains tax, or normal income tax? Does the clock start ticking while stock is vesting or after
by skizm 7y ago
If you sell immediately after your stocks vest, do you pay capital gains tax, or normal income tax? Does the clock start ticking while stock is vesting or after?
- vlozko 7y agoNormal income tax. It starts ticking at the time of vesting. Capital gains comes into play if you sell it for a price different than what it vested for.
- tehlike 7y agoVesting is a taxable event. You pay income tax on the amount. Selling is a taxable event, you pay capital gains on sell price minus vest price. If you sell immediately, the diff between sell and vest will be very close to zero, but it wont be zero, so you pay capital gains or erite capital loss... Capital loss is tricky because of wash salrs rules, so likely you won't be able to write off...
- awithrow 7y agoFor RSUs typically the amount vested is taxed as income. Often the broker sells shares to cover this and withholds the money for taxes. At that point your basis is the value of the stock on the day it vested. As always, be sure to check with your accountant/tax professional for your own situation.
- pavlov 7y agoRSUs (Restricted Stock Units) are taxed as income when they vest. Typically shares are withheld to pay the tax before you ever see them. I.e. if your tax rate is 50% and you're getting an award of 100 shares, you'll only receive 50 shares in your account. After that the shares are treated as if you'd purchased them at market rate. If you sell them immediately, there's no capital gain and no further tax to pay.
- C1sc0cat 7y agoBut presumably they vest at a lower price - also do you have taper relief? By taper relief I mean you sell older shares first and get taxed on long term capital gains first in first out.
- pavlov 7y agoRSUs are stock awards. The vesting price to the employee is zero, and so each vesting tranche is treated as income on the day of the vest.
- chongli 7y agoWhere do the other 50 shares go? Is the government holding billions of dollars worth of shares in private companies? Or do they immediately put them on the market? Seems like that might distort the price.
- hugofirth 7y agoPresumably this structure means the company pays the tax to the government, and are, in essence, buying back their own shares :)
- mytailorisrich 7y agoIt's called "sell to cover": All the shares vest, then a number of them are automatically sold on the open market and the proceeds are withheld to cover the income tax liability. It's often possible to choose between doing that or keeping all the shares and paying the tax liability out of your salary.