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RSUs, ESPP and tax strategy

2,569 Views | 33 Replies | Last: 2 mo ago by DannyDuberstein
CapCity12thMan
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4:12p, 8/21/24
AG
I have ESPP shares purchased over time, as well as RSUs that have been granted and now vested, over time.

fortunately this is over a 20 year period, and the stock price is shown in the image:



so needless to say that one large spike in 2022, when both ESPP buys happened 2x and some RSU granted - those were acquired at a stock price higher than today. Everything else was bought lower so if ALL sold but the 2022 ones today, I would have gains, taxes, normal stuff, etc. When I do sell I pick the time period from when they were bought and the amount...so I could sell 2001 shares or 2020 shares, whatever I wish, etc.

Since RSUs were granted, I see that as free money. Maybe that is wrong. If I sell the RSUs that were granted at a higher price than today, would I get to recognize that as a loss? Doesn't sound like I would but they were granted at a price that is $80/share higher than todays close. Curious how this plays out.
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Leeman
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4:18p, 8/21/24
They are shares acquired at the vesting dates (basically you bought them at that price). After that, if you sell them they are short term or long term (depending on if you hold onto them for a year) gains/losses.
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CapCity12thMan
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In reply to Leeman • 4:22p, 8/21/24
AG

Quote:
basically you bought them at that price

except with RSUs that were granted, I didn't
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Diggity
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4:26p, 8/21/24
AG
I would imagine you've already "paid" your taxes on the RSU's that vested, whether they took it from your cash in the account, sold some shares, or netted out the shares. Those are the typical options I have seen, and you elect which one you want to do.

Maybe it works differently at other companies.

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CapCity12thMan
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In reply to Diggity • 5:29p, 8/21/24
AG
yes I have paid taxes on those already - cant recall in what way but I know I have.

Question still remains...if I sell these, do I get to take a loss since I am selling less than the acquired price, even though I did not purchase them - they were granted.
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Fireman
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In reply to CapCity12thMan • 5:36p, 8/21/24
AG
CapCity12thMan said:
yes I have paid taxes on those already - cant recall in what way but I know I have.

Question still remains...if I sell these, do I get to take a loss since I am selling less than the acquired price, even though I did not purchase them - they were granted.
For the ones you were issued, the value at issuance date becomes essentially your purchase price. You paid taxes at the time you received them, as it was payroll income to you from your company. From that point forward you need to measure your cost basis (price when you received them) vs. your sales price (price per unit when they were sold). If you have not sold any, you don't have any taxes due.

Said simply, after receiving your RSUs from your company, you only owe taxes for the change in value in the units. For example, if you received them and the price was $30/unit and then 5 years later you sell them for $40/unit you owe taxes on the $10 price increase on your units in the year they were sold.

Any chance your RSUs are part of a master limited partnership (MLP)? If so, the answer is more complex and challenging and you will likely need the assistance of a CPA to help with your taxes. Ignore my answer (first two paragraphs) if the RSUs are part of an MLP.
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CapCity12thMan
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In reply to Fireman • 5:49p, 8/21/24
AG

Quote:
Any chance your RSUs are part of a master limited partnership (MLP)?


No

Question still remains...if I sell these, do I get to take a loss since I am selling less than the acquired price, even though I did not purchase them - they were granted.
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jagvocate
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5:59p, 8/21/24
AG
https://www.equityftw.com/articles/tips-for-selling-rsus-at-a-loss

"Your loss is determined by the value on the vest date not the grant date."


The value of your RSUs at the time they were granted to you does not matter at all after they've vested.

The loss at which you sell in E-Trade, Fidelity, Schwab, etc. is based on the price your company stock was selling at on the vest date.

"For example, if you were granted RSUs at $50 which rose to $75 at vest and are now trading at $60 a share, you owed taxes on the $75/share and now have a $15/share unrealized loss."

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Ragoo
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In reply to CapCity12thMan • 6:22p, 8/21/24
AG
CapCity12thMan said:

Quote:
Any chance your RSUs are part of a master limited partnership (MLP)?


No

Question still remains...if I sell these, do I get to take a loss since I am selling less than the acquired price, even though I did not purchase them - they were granted.
yes. Your basis is the price on day of vesting. If you want to sell the loss shares, then also sell an equivalent gain to net $0 in both gain or loss.
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Baby Billy
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In reply to CapCity12thMan • 8:51p, 8/21/24
AG
CapCity12thMan said:
yes I have paid taxes on those already - cant recall in what way but I know I have.

Question still remains...if I sell these, do I get to take a loss since I am selling less than the acquired price, even though I did not purchase them - they were granted.

The answer to your question is yes as long as the shares you sell have been held for more than a year beyond the date they were vested.
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Diggity
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In reply to Baby Billy • 8:57p, 8/21/24
AG
would the length of time matter?
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Baby Billy
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In reply to Diggity • 9:09p, 8/21/24
AG
Diggity said:
would the length of time matter?

Not if it's more than a year
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Diggity
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In reply to Baby Billy • 9:32p, 8/21/24
AG
What's the restriction for selling under a year?
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Baby Billy
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In reply to Diggity • 9:46p, 8/21/24
AG
Diggity said:
What's the restriction for selling under a year?

Here you go
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Leeman
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In reply to CapCity12thMan • 9:54p, 8/21/24
CapCity12thMan said:

Quote:
basically you bought them at that price

except with RSUs that were granted, I didn't
Effectively they were bought and have a basis value when they vested. You paid taxes on that value. After that they look like any share you bought.

Next time, don't be a dick.
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CapCity12thMan
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9:58p, 8/21/24
AG

Quote:
If you want to sell the loss shares, then also sell an equivalent gain to net $0 in both gain or loss.

yes...this was what I was thinking...use the free money to end up not having to pay taxes

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Diggity
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In reply to Baby Billy • 10:04p, 8/21/24
AG
I really don't get your point.
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CapCity12thMan
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In reply to Leeman • 10:08p, 8/21/24
AG
If being a dick means I couldn't understand the ambiguity in your response, then sure. I'll make sure and check with you next time I post something though.
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txaggie_08
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In reply to Baby Billy • 4:32a, 8/22/24
AG
Baby Billy said:
Diggity said:
What's the restriction for selling under a year?

Here you go

There aren't capital gains to worry about if you sell at a loss. CapCity was specifically talking about selling at a loss. He can sell the same day they vest at a loss and write that loss off.
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Baby Billy
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In reply to txaggie_08 • 7:41a, 8/22/24
AG
txaggie_08 said:
Baby Billy said:
Diggity said:
What's the restriction for selling under a year?

Here you go

There aren't capital gains to worry about if you sell at a loss. CapCity was specifically talking about selling at a loss. He can sell the same day they vest at a loss and write that loss off.


I know that. I was answering the question about holding period and whether the loss is treated as long term or short term.
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Diggity
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10:23a, 8/22/24
AG
a question that was never asked. Thanks!
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kyledr04
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10:51a, 8/22/24
AG
Lots of good info here about Rsu valuation and taxes.

A lot of people recommend selling RSU when they vest and diversifying after that. But if you've been holding since 2002, that's been some amazing returns. I'd sell a ton. Depends a lot on your overall investment mix but I'd be worried about being overly invested in one company and taking a big loss like you did a few years back.
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Baby Billy
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In reply to Diggity • 10:58a, 8/22/24
AG
Diggity said:
a question that was never asked. Thanks!

Maybe I was confused by the question then. Not sure why you're being an ass hole
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Diggity
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In reply to Baby Billy • 11:06a, 8/22/24
AG
Nobody asked about short term vs. long term and your response made it sound like you couldn't sell RSU's before one year.

I wasn't aware of such a restriction, so I asked you to clarify (three times).
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CapCity12thMan
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In reply to kyledr04 • 11:36a, 8/22/24
AG

Quote:
I'd be worried about being overly invested in one company and taking a big loss like you did a few years back.

yes been hearing that since mid-2000s but I just can't get away from the graph trend. It has been amazing returns and have been selling more and more lately for a variety of reasons, just not willing to sell the vast majority and take on other risk when the risk here has panned out in our favor. Trimming down the position as we need it. Selling shares that are just over a year (avoid short term gain), and that give is a decent profit...but keeping the really old ones. Strategy being - this allows us to not be on the losing side if the stock tumbles a bit. Sell shares in the 230-280 range, take a bit of gain, leaving shares purchased sub 230 and keep riding the wave. I hope it pans out. This is not a case study in diversification, I get it.

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Diggity
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In reply to CapCity12thMan • 12:09p, 8/22/24
AG
I've never been in that position, but have heard of people using "direct indexing" (combined with tax loss harvesting) to help unwind larger positions.

There's a podcast I listen to where the host extols the virtues of this strategy pretty often, but not sure how useful it really is (or how much you need to be holding to make it worth your while).

This gives a decent summary:

Quote:
3. You have a concentrated stock position with significant built-in gains

Investors with large holdings in one or a few stocks can mitigate some of their concentration risk by taking advantage of two features of direct-indexing strategies: 1) They can sell down their concentrated positions while harvesting losses to offset some or all of their tax liability; and 2) they can "customize" their account by excluding stocks that would create more concentration risk.

Imagine you're an executive at a large technology company with $5 million worth of highly appreciated stock that you accumulated through corporate stock plans and incentives. You understand how risky it can be to tie your fortunes to a single stock and would like to move your assets into a broad stock market index to lower your concentration risk. You'd also like to avoid making more investments in other tech companies that would duplicate your risk.

Assuming your stock was part of the index you wanted to track, you could include some of it in a direct-indexing portfolio. The exact amount your portfolio could accommodate would depend in part on how closely you wanted your portfolio to track the target indexholding onto too much could hamper its ability to track.

Then, you could gradually sell down the rest over the course of several years. As you transitioned more of your assets into the direct-indexing account, you could theoretically offset some of your gains with the losses harvested in your direct-indexing portfolio.
https://www.schwab.com/learn/story/how-to-use-direct-indexing-as-tax-strategy
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Baby Billy
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In reply to Diggity • 12:31p, 8/22/24
AG
Diggity said:
Nobody asked about short term vs. long term and your response made it sound like you couldn't sell RSU's before one year.

I wasn't aware of such a restriction, so I asked you to clarify (three times).
There isn't a restriction, but the holding period of the shares certainly matters if he's trying to use short term losses to offset long term or short term gains. OP doesn't offer any details on the amount or what exactly he's trying to do. He just asked if sold whether he could "write it off". Since "write off" to me equals "deduction" then if he had a net loss he'd be limited to just a $3k "write off"
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CapCity12thMan
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In reply to Baby Billy • 2:12p, 8/22/24
AG

Quote:
he's trying to use short term losses to offset long term or short term gains. OP doesn't offer any details on the amount or what exactly he's trying to do.

I don't really feel based on the trajectory of the stock over time that I need to entertain short term gains (or losses), this would all be long term, since I can sell lots purchased from 2001-2022. As mentioned, these holdings are sold when I need cash for certain things so I have the flexibility to choose.
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Fireman
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In reply to Ragoo • 5:16p, 8/22/24
AG
Ragoo said:
CapCity12thMan said:

Quote:
Any chance your RSUs are part of a master limited partnership (MLP)?


No

Question still remains...if I sell these, do I get to take a loss since I am selling less than the acquired price, even though I did not purchase them - they were granted.
yes. Your basis is the price on day of vesting. If you want to sell the loss shares, then also sell an equivalent gain to net $0 in both gain or loss.
You would need gains to be able to use any of your losses incurred on selling your RSU following the price decline.
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JbKing45
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11:41p, 8/24/24
Really good discussion here. Just curious if there is anything to reduce the tax burden from the grant date to vest. I'm assuming you can't file an 83b on it and it's always going to be classified as ordinary income. It's too bad there isn't anything you can do to help out with the tax burden.
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YouBet
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8:23a, 8/25/24
AG
Irrelevant for OP at this point, but we always sold our RSU's as soon as they hit the account upon vesting. I never wanted that much exposure in one stock and it always served us well.
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Leeman
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In reply to YouBet • 8:38a, 8/25/24
YouBet said:
Irrelevant for OP at this point, but we always sold our RSU's as soon as they hit the account upon vesting. I never wanted that much exposure in one stock and it always served us well.
Many people will sell shares at vest to cover the taxes (in addition to the ones that are sold for you - which usually are not enough - depending on company I've had 22%, 25%, and 28% auto sold).
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KT_Ag08
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8:09p, 8/25/24
AG
Aon?
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DannyDuberstein
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In reply to YouBet • 5:39p, 8/29/24
AG
YouBet said:
Irrelevant for OP at this point, but we always sold our RSU's as soon as they hit the account upon vesting. I never wanted that much exposure in one stock and it always served us well.


Same here. Especially given your salary is tied to the same company. If the RSU grants are robust at all, lots of eggs in one basket. They are headed to my brokerage account and being diversified as part of my overall portfolio strategy post haste.

Tax will be based on value at vest date. The current Trump tax cuts will sunset in 2026 and capital gains rates will go up significantly. Look into the projection for your income level and the gains you would expect to have, but if Kamala wins, I'd be looking to liquidate a decent chunk of gains in 2025
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