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What about capital gains? I hold mine for a year because I was under the impression that liquidating immediately would cause you to pay short term capital gains
by dboon 4y ago
What about capital gains? I hold mine for a year because I was under the impression that liquidating immediately would cause you to pay short term capital gains rather than long term.
- AnotherGoodName 4y agoThe stock price has to go up from the purchase price for capital gains. If you sell immediately on vesting this should be 0.
- adam_arthur 4y agoThe face value of the RSU is treated as income (taxed) when it vests. If the stock then appreciates, you have to hold it for a year to get long term capital gains tax on the appreciated amount (not the original vest amount). So there's no tax advantage to waiting to sell. Only if you wait and it happened to go up in that time, and then you don't want to incur short term cap gains on that appreciation. There is a big tax liability problem if you choose not to sell and the stock declines though. You may end up owing more in taxes than the stock is worth in some cases
- erik_seaberg 4y ago22% of my RSUs (the federal withholding rate on supplemental income) are sold rather than released to me, so only a huge crash could leave me in the hole on my 8%-ish estimated taxes.
- lupire 4y agoA huge crash like 70%, which happened this year?
- erik_seaberg 4y agoBigger; if I receive $78,000 out of $100,000 in shares and then they drop to $23,000, that still more than covers the $8,000 of under-withholding I need to pay. Granted, $15,000 after tax income would not be what I was hoping for. (I'm ignoring state income tax because my withholding on that happens to be correct.)
- time_to_smile 4y agoThis would only matter if your stock immediately shot up the moment it vested. All the growth during vesting is taxed as income at the time of vesting. Capital gains only covers the value increase over the year you hold the stock after its vested. If you work at META, and then immediately on vesting diversify and don't touch the stock for a year you'll reap the same capital gains benefits but with a diversified portfolio. You also have a wide range of defensive strategies you can apply that you can't if you're locked into trading windows. Say a META employee was very bullish on FAANG in general and at vesting put all their money in GOOG. If they were nervous about this week's earnings they could have either closed their position to see what happens, or bought defensive puts to lock in a maximum loss. Had they instead chosen to hold META they would have neither of these options. There are cases for recently IPO'd companies where you vest then have a potentially 6+ month lockout period for trading. In those cases it can make sense , provided you have seen substantial gains in that lockout period to keep holding for tax reasons.