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I bet no one on here is mad at the tax break companies get by offering RSUs, which is how a lot of Silicon Valley dodges taxes as well.
by stevehawk 7y ago
I bet no one on here is mad at the tax break companies get by offering RSUs, which is how a lot of Silicon Valley dodges taxes as well.
- option 7y agopeople who get RSUs in California pay about 50% (state plus federal) tax on it. Where is that tax break again?
- traviscj 7y agoMy read was that the _companies_ get the tax break. The employees get taxed to shit, but it's still better than not getting the RSUs.
- outside1234 7y agoI don't think that's true, other than the value of the RSUs being counted as an expense against earnings (like Salary would be).
- jcranmer 7y agoI wouldn't be surprised if RSUs were not included in payroll taxes.
- drharby 7y agoReminds me of that episode of futurama where they almost become rich from being acquired by Mom. "I suddently have an opinion about the capital gains tax!" The tax bill paid by new grads for their rsus is usually their first experience with non-income tax flavored taxes, and I think we have an incentive to ask for cash in leiu of rsus for that exact reason. Of course, not going to complain too mich.
- myvoiceismypass 7y agoWhat tax breaks do companies get by offering RSUs instead of cash?
- pc86 7y agoNo payroll taxes.
- lokar 7y agoPayroll taxes typically max out short of the typical engineer base pay. The RSU comp would not generate more tax even if it was cash.
- junar 7y agoWhich payroll taxes do you mean? I've seen Social Security (up to the limit), Medicare (no limit), and Additional Medicare (after $200k) being withheld from the employee side. I would assume that employer-side taxes are also being paid.
- 0xEFF 7y agoThe employer medicare tax doesn’t max out. The employee gets most of the benefit of RSU’s. They’re taxed as cap gains, maxing out around 23% while cash is taxed at the marginal rate, closer to 50% all in with state and federal and a FAANG salary.
- et-al 7y agoPretty sure RSUs are taxed as income when they vest. The employee has the option to automatically have a portion of those RSU withheld for tax purposes. Then when the employee sells the stock, the diff from vesting price is naturally taxed as cap gains/losses.
- 0xEFF 7y agoYou’re correct, Schwab says they’re “almost always” taxed at vesting.
- sseveran 7y agoIn fact most of these articles neglect to point out why the tax rates are what they are or offer specific policy prescriptions. I would at least respect them if they said something like "let's get rid of the R&D tax credit." SarbOx made stock grants an expense that is recognized so we could undo that which would greatly increase the net income that is taxable by many of these companies given their reliance on stock based compensation. Without discussing which provisions (and they are actual laws, not loopholes, because many/most are intentionally there) we should be eliminating this is all just a lot of handwringing.
- goler 7y agoExactly. Don't hate the player, hate the game. Any real discussion needs to get into specifics of which rules of the game are unfair and how they can be improved.