RSU strategies

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If you’ve got excess exposure to this company through plans and/or unvested shares, you’d be doing exactly what I do.

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Plenty more unvested so it feels like any upside is captured in those. With the stock at ATH, it feels like free money and avoids additional gains tax.

Just curious if there are any tax benefits/detriments I'm not thinking about.

I wouldn't want the ordinary income hit. I'd rather hold for the LTCG. Depending on your bracket, that could be 15%+ difference.

Correct.

LTCG (or loss) is only if held for 366 days. If you sell immediately, barring crazy price moves on day 1, you’d have minimal tax impact.

It’s ordinary income at the moment it vests. I would generally sell to them diversify unless you have some additional equity rewards conditional on maintaining a certain value in the company.

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Not applicable for RSUs

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It is if they can be stock settled

Also many don’t know the difference between RS and RSU and incorrectly use the terms interchangeably

When I started at my first company that granted RSUs I received some good advice that stuck with me.

RSU's are a part of your total compensation package. If your company instead gave you the cash value of a RSU vest, would you spend all of your that cash on buying shares of the company?

I like to hold onto a few shares here and there but I mostly sell up upon vesting just like you. Some will go towards a family vacation, some I invest or beef up savings. I never liked the idea of having a large amount of my wealth in one stock.

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Correct me if I'm wrong, but say you have 500 of RSUs. Once they vest you would only get 350 of those (they have taxed the other).

If I hold and in the next month the stock doubles, and I sell it's a STG. If I hold and sell after the year and gains at the time of vesting would be LTCG.

I understand you take a haircut on the RSU right off the bat. I am talking about if you choose to hold, hold for a year.

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Assuming they are stock settled.

Stock is worth $10 at time of vest. 500 shares = $5,000 of income. You are taxed on that $5,000 right there, as compensation income.

Generally, some are immediately sold to cover the tax impact on the $5,000. You get the remaining shares. Let's assume you sold 150. You have no gain or loss on these 150 because it was sold one second after it vested.

Now you have 350 shares with a cost basis of $10 each, and your holding period clock starts now.

In 7 months, you sell them at $12 each. You have Short Term Cap Gain of $2.

But instead, you sell them in 15 months at $13 each. You have long term cap gain of $3.

Why do I say "assuming they are stock settled"? Because some RSUs are cash settled. If they are cash settled, on vesting date, you get $5,000 of cash compensation, they do withholding, and send you the rest. No different than a cash bonus, really, but it's just tied to the value of stock at time of vesting.