Restricted Stock Units
Planning for RSUs: what to keep, what to sell, and how to pay the tax
For most of our clients, restricted stock units are the largest source of wealth they will ever have, and the least planned. The shares arrive on a schedule you didn’t choose, taxed at a rate the payroll system guesses, and pile up in a single company you already depend on for a paycheck.
We help you decide what to keep, what to sell, when, and how to pay the tax without surprises. That is the whole job, and it is worth doing well: for someone with $200,000 of vests a year, the difference between an intentional plan and the default is routinely tens of thousands of dollars in tax and a portfolio that is either dangerously concentrated or not.
What actually goes wrong with RSUs
The 22% problem
Employers withhold federal tax on vests at a flat 22%. If your salary plus vests puts you in the 32%, 35% or 37% bracket, every vest under-withholds, and the shortfall lands as a bill in April, sometimes with a penalty.
One stock, all your eggs
Vested shares nobody sells become a position that dominates the balance sheet. Great companies still see 40% to 60% drawdowns. When your job and your savings depend on the same ticker, that is a risk worth pricing.
Paying tax twice
Brokers often report a $0 or wrong cost basis on shares sold, so the income already taxed on your W-2 gets taxed again as a capital gain. It is the most common RSU error we see on returns.
Trading windows and taxes collide
Blackout periods, 10b5-1 plans, year-end vests and the wash-sale rule all constrain when you can act. A plan made in advance uses the windows you have.
RSU Tax Withholding Gap Calculator
Enter your salary and this year’s vests. See whether the 22% covers your bracket, the shortfall in dollars, and what to set aside per paycheck.
How we handle RSUs for clients
A selling policy, not a feeling. Most clients end up with a simple rule: sell a set share of each vest on the vest date, hold the rest up to a concentration ceiling, and revisit the ceiling once a year. Since RSUs are taxed as income at vest whether you sell or not, selling at vest has no tax cost; holding is a fresh decision to buy the stock.
Withholding fixed before the bill. We estimate the year’s tax including vests, and close the gap with extra W-4 withholding or an estimated payment before the quarterly deadline, so there is no April surprise and no underpayment penalty.
Diversification that respects the tax bill. For large, low-basis positions we build a multi-year schedule that sells high-basis lots first, uses low-income years, donates appreciated shares when giving is already part of the plan, and harvests losses elsewhere to offset gains. Our concentrated stock planner shows what that schedule looks like.
Coordination with your CPA. We send lot-level records and the W-2 basis adjustments your preparer needs, so the return matches what actually happened.
If you are leaving or retiring
Unvested shares are usually forfeited when you leave, so the timing of a departure around a vest date can be worth a great deal. Some plans continue vesting into retirement after a certain age and tenure; most don’t. Before you give notice, we map the vest calendar, model the tax year you would create by leaving before or after a large vest, and set up the year-one plan for the shares you keep.
Have a vest schedule you’d like a plan for?
Bring your grant summary and last year’s W-2. In one conversation we can tell you whether your withholding is short, how concentrated you are, and what a sensible selling policy would look like.
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