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> 3) You can sell your RSUs once they vest in order to diversify, but you have to wait a year after vesting or short term gains tax will apply. This is incorre
by alex_young 7y ago
> 3) You can sell your RSUs once they vest in order to diversify, but you have to wait a year after vesting or short term gains tax will apply.
This is incorrect. RSUs, once vested, are taxed as income, and any gains or losses from the day they vest are treated as any other stock would be from that day on. There is no tax benefit in holding on to them rather than selling and diversifying.
This detail makes RSUs equivalent to income from an employee's perspective, and offers no incentive alignment post vesting IMHO.
- matmann2001 7y agoI meant that short term gains tax applies post-vesting. I'll try to make that clearer. Of course, you're right in that selling immediately incurs no additional tax, as you'd be paying short term gains tax on essentially $0.
- klipt 7y agoRight, but if you sell immediately on vesting those gains will be ~0, so there's no major tax downside to selling immediately and e.g. buying an index fund instead to diversify.
- darkarmani 7y ago> I meant that short term gains tax applies post-vesting. I'll try to make that clearer. Of course, you're right in that selling immediately incurs no additional tax, as you'd be paying short term gains tax on essentially $0. That's still wrong. They purchase date of the RSU is on the issue date. Vesting is unrelated. You are thinking of "exercising" an option. This is not an exercise. 1. You get a RSUs. They are actual stock, but they are encumbered by the vesting schedule. 2. When they vest, you are now allowed to trade them, but your ownership start date is from #1. If you had a 180 day vest, you'd have to wait until a full year is up to avoid short-term gains, but if vesting took longer than a year, you've already held them for longer than a year.