4 ms·

Isn't the tax already withheld at the time of vest? I mean sure at some point your tax rate is going to be much higher than the withholding rate so you end up p

Isn't the tax already withheld at the time of vest? I mean sure at some point your tax rate is going to be much higher than the withholding rate so you end up paying extra over it. Concentration is the real risk. I know many people at Apple and Microsoft whose only investment is their company stock. It has worked out well for them but they're just one big scandal away from disaster.

adam_arthur 4y ago
No tax is withheld at vest time. At least in the majority of cases/usually. Holding vested RSUs is only wise if your conviction is that the company you work for is the best investment available at the time. You can easily sell them and invest in other stocks instead, which reduces your risks substantially
- nsenifty 4y ago
  > No tax is withheld at vest time. At least in the majority of cases/usually. My last two employers deducted shares at vest as tax. This is in US, btw. I am surprised it isn't the common practice. The only problem was that the withholding rate was too low for my effective tax rate which means I always have to pay estimated taxes.
  - kevinventullo 4y ago
    Google and Facebook both deduct shares at vest. The default is something like 25%, which isn’t too far off from most folks’ effective tax rates. Yet, base comp tends to be withheld at marginal rates; so if you don’t change anything, you can still end up owing a decent amount.
    - junar 4y ago
      > The default is something like 25% Default withholding has been 22% now for a few years. I bring this up because the gap between default withholding and the higher marginal rates has widened compared to the years it was at 25%. > Yet, base comp tends to be withheld at marginal rates To clarify, default withholding on base pay uses your bottom tax rates. It assumes you have no other income, so it will calculate based on standard deduction, 10%, 12%, then working upwards. So I wouldn't use the word "marginal" to refer to base pay because most people understand that as their top tax rates. This means that for bonus, stock, and other compensation, it's reasonable to increase withholding to reflect the top tax rates. > most folks’ effective tax rates A bit of an aside, but I'm not a big fan of the idea of "effective tax rates". It's not a term the IRS uses, but something that tax software companies like to push for whatever reason. You also can't do much with it in practice: regarding withholding, it's not useful and potentially confusing.
      - kevinventullo 4y ago
        Thank you for the correction, and yes I agree with everything you wrote!

adam_arthur 4y ago

No tax is withheld at vest time. At least in the majority of cases/usually. Holding vested RSUs is only wise if your conviction is that the company you work for is the best investment available at the time. You can easily sell them and invest in other stocks instead, which reduces your risks substantially

nsenifty 4y ago
> No tax is withheld at vest time. At least in the majority of cases/usually. My last two employers deducted shares at vest as tax. This is in US, btw. I am surprised it isn't the common practice. The only problem was that the withholding rate was too low for my effective tax rate which means I always have to pay estimated taxes.
- kevinventullo 4y ago
  Google and Facebook both deduct shares at vest. The default is something like 25%, which isn’t too far off from most folks’ effective tax rates. Yet, base comp tends to be withheld at marginal rates; so if you don’t change anything, you can still end up owing a decent amount.
  - junar 4y ago
    > The default is something like 25% Default withholding has been 22% now for a few years. I bring this up because the gap between default withholding and the higher marginal rates has widened compared to the years it was at 25%. > Yet, base comp tends to be withheld at marginal rates To clarify, default withholding on base pay uses your bottom tax rates. It assumes you have no other income, so it will calculate based on standard deduction, 10%, 12%, then working upwards. So I wouldn't use the word "marginal" to refer to base pay because most people understand that as their top tax rates. This means that for bonus, stock, and other compensation, it's reasonable to increase withholding to reflect the top tax rates. > most folks’ effective tax rates A bit of an aside, but I'm not a big fan of the idea of "effective tax rates". It's not a term the IRS uses, but something that tax software companies like to push for whatever reason. You also can't do much with it in practice: regarding withholding, it's not useful and potentially confusing.
    - kevinventullo 4y ago
      Thank you for the correction, and yes I agree with everything you wrote!