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jc-2020
Level 2

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

They are RSUs that have vested and I had them for more than a year,  and now I want to transfer in kind to a charity, in which case I do not have to pay any taxes on capital gains.

But the question is, what happens to the taxes already paid on the RSUs? How do I get those taxes back?


For instance, 51 shares vested, but 16 were sold to cover taxes during the release. Are those taxes gone forever? or how do I account for them when I file the 2020 taxes next year?

RE: sell-to-cover

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/entering-sell-to-cove...

 

1 Best answer

Accepted Solutions
NCperson
Level 15

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

let's continue my example to answer your questions...

 

I understand you are going to donate "ALL" to charity.  But what is "ALL"?  You only own 300 shares (from my example) ; you do not own 500 shares.  So you can only donate the 300 to charity. 

 

The other 200 shares are  'water under the bridge'; you do not get them back and you can not donate them.

 

When the restriction period ended, those shares that you were given by your company was considered 'earned income' so you must pay taxes on it (which you did!).  Those shares weren't given to you without the consequences of paying taxes; it's just not how the system works.  Just because you were paid in stock doesn't mean the obligation to pay taxes (as if you had been paid in cash) was somehow forgiven.  

 

So kudo's for you for donating the shares you own! You just can't donate what you don't own! 

 

so if you sell the shares and then donate the proceeds, any capital gain (and therefore tax) can be wiped out by the donation (but be careful! you need to be itemizing your deductions for this to work!).   Alternatively, transfer the ownership of the shares to the charity and let them sell them.

 

does that help? 

 

 

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5 Replies
NCperson
Level 15

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

normally, the way this works is the employer will sell the shares and place the net into your W-2.   is that what occurred?  if so, there is NOTHING additional to report into TT.  It's all in your W-2. 

 

let's say you had 500 RSUs and on the day they vested the stock was selling for $10.  The taxes (federal, state, social security, medicare) were $2000.  So the company would have sold 200 shares to cover the taxes and then gave you the remaining 300 shares.  Your W-2 would reflect income of $5000 and then the withholdings for the $2000 would be scattered into federal , state, medicare and social security lines.

 

You don't receive any cash, but you do receive the 300 shares in this example.  your cost basis in these shares are 300.  Whenever you eventually sell, the gain or loss associated with these shares will be pegged to $10 per share.  But these sell transactions are not to be reported into TT until you actually sell! 

jc-2020
Level 2

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

Hi NCperson,

 

Thank you for the explanation. Yes, as you mentioned, they showed up in my W2. And yes, I follow that nothing is reported until I sell...

 

So, if I sell now (2020), then when I do my taxes for 2020 I'd report this in TT.

 

BUT, and this is my BIG question... the stuff/TAX that was reported earlier on my W2, how do I get that back???

 

The 'sell transaction' will be this year. BUT it is NOT actually a sell!!! It will be a GIFT, a 'transfer in kind' to CHARITY -- and for this there is ZERO taxes! (BUT they were already taken out in that W2!)

(according to this: https://www.fidelitycharitable.org/giving-account/what-you-can-donate/donating-stock-to-charity.html)

 

So, those TAXES paid earlier on my W2, I need to get them back because there shouldn't have been any taxes paid on stock donated to charity!

 

Thanks.

 

NCperson
Level 15

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

let's continue my example to answer your questions...

 

I understand you are going to donate "ALL" to charity.  But what is "ALL"?  You only own 300 shares (from my example) ; you do not own 500 shares.  So you can only donate the 300 to charity. 

 

The other 200 shares are  'water under the bridge'; you do not get them back and you can not donate them.

 

When the restriction period ended, those shares that you were given by your company was considered 'earned income' so you must pay taxes on it (which you did!).  Those shares weren't given to you without the consequences of paying taxes; it's just not how the system works.  Just because you were paid in stock doesn't mean the obligation to pay taxes (as if you had been paid in cash) was somehow forgiven.  

 

So kudo's for you for donating the shares you own! You just can't donate what you don't own! 

 

so if you sell the shares and then donate the proceeds, any capital gain (and therefore tax) can be wiped out by the donation (but be careful! you need to be itemizing your deductions for this to work!).   Alternatively, transfer the ownership of the shares to the charity and let them sell them.

 

does that help? 

 

 

jc-2020
Level 2

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

Perfect. Now it is crystal clear.

 

Very much appreciated that you took the time for this.

 

-JC

Anonymous
Not applicable

RSU vested and paid taxes but I want to give them to charity - how do I get the tax back?

 

Thank you for the explanation. Yes, as you mentioned, they showed up in my W2. And yes, I follow that nothing is reported until I sell...

 

So, if I sell now (2020), then when I do my taxes for 2020 I'd report this in TT.   you report the sale with a basis of $10 per share or whatever it is.  you'll end up with either a capital gain or capital loss.   capital losses are limited to $3,000 1/2 that if MFS 

 

BUT, and this is my BIG question... the stuff/TAX that was reported earlier on my W2, how do I get that back???    you don't get it back directly   you can give the stock to charity - you get a deduction for its Fair Market value at date of contribution  or you can  sell and the give cash to charity.    chairity is part of itemized deductions.  For itemized deductions (medical in excess of 7.5% of adjusted grosss income, taxes limited to $10,000 MFJ or Single or $5,000 MFS, mortgage interest which can be limited and charitable contributions to be of any benefit they have to exceed your standard dedution for 2020 - $24,800 MFJ or 1/2 that single or MFS

 

The 'sell transaction' will be this year. BUT it is NOT actually a sell!!! It will be a GIFT, a 'transfer in kind' to CHARITY -- and for this there is ZERO taxes! (BUT they were already taken out in that W2!)

(according to this: https://www.fidelitycharitable.org/giving-account/what-you-can-donate/donating-stock-to-charity.html)

donatng stock to charity is not really a gift in the tax sense it is a deductible charitable contribution as described above 

So, those TAXES paid earlier on my W2, I need to get them back because there shouldn't have been any taxes paid on stock donated to charity!     

 

sorry but taxes don't work as you hoped,  at best you'll get a charitable deduction for the stock and any cash given to charity.     you can't avoid the compensation (w-2)  consequences of excerising RSU's  

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