[Event] Ask the Experts: Investments: Stocks, Crypto, & More

Understanding RSU taxation is essential for proper planning and minimizing your tax liability. RSUs (Restricted Stock Units) are taxed in two key phases:

• At Vesting: RSUs are taxed as ordinary income based on the Fair Market Value (FMV) of the shares on the vesting date. This amount is reported on your W-2 and subject to federal, state, and payroll taxes (Social Security and Medicare).

• At Sale: Any gain or loss from selling the RSU shares is taxed as capital gains:

  • Short-term if held one year or less

  • Long-term if held more than one year

RSU Tax Minimization Strategies

Here are some commonly used strategies to reduce your tax burden:

1. Sell Immediately Upon Vesting

Avoid additional capital gains taxes if you don’t want to hold the stock. This approach simplifies tax reporting and reduces market risk.

2. Hold for Long-Term Gains

If you believe the stock will appreciate, holding for more than one year allows you to benefit from lower long-term capital gains rates.

3. Stagger Vesting Dates

Spreading vesting across multiple years can help avoid income spikes. Some RSU plans allow deferral elections, though not all do.

4. Ensure Correct Withholding

RSU income is often under-withheld at a flat 22% rate. Contact your plan administrator or financial institution to adjust withholding if needed.

5. Pay Estimated Taxes Quarterly

If withholding is insufficient, make quarterly estimated tax payments to avoid penalties. IRS due dates are typically April 15, June 15, September 15, and January 15.

Refer to the IRS guide on estimated tax payments   for more details.

6. Sell Shares to Cover Taxes

Use a “sell-to-cover” method where a portion of shares is sold automatically to cover tax obligations at vesting.

7. Consult Your Plan Administrator or Financial Advisor

RSU plans vary widely. Professional advice ensures you’re using the best strategy for your situation.

Good luck and Thank you!