In this case, I would encourage you to hold it for 6 more months. You will sell it in one of two scenarios. An additional 6 months pass, for a full year and 1 day, or the stock drops down to the price at IPO. The benefit of waiting for an additional 6 months is the long-term capital gains tax rate. These 2 unique cases present opportunities for you to accumulate your RSUs.
The benefits in these cases outweigh the risk and tax incentives. In all other cases, you should strongly consider selling your RSUs.
Remember, RSUs are simply income in the form of your employer shares. If you got the same amount of money in cash would you go and buy the same amount of your company shares as you were granted? As always there is an exception to every rule. Everything changes when you introduce ESPP to the mix. Selling your employer stock can be a hard decision to make. We would love to provide you a free consultation, answer your questions, and see how we can be of help.
Click HERE to get your questions answered. Join 1, readers, never miss a fresh perspective on financial matters that matter, and get two FREE investing tools. Not In These 2 Situations. Previous Next. Some clients will argue that if they hold RSUs for more than a year, the RSUs will qualify for the lower long-term capital gains rate.
However, the long-term capital gains rate only applies to the gain from the stock price on the vesting date. If you bought stock on your vesting date and held it for more than one year, that stock would also qualify for the long-term capital gains rate.
You get the exact same tax treatment if you hold your RSUs or buy the stock so there is no tax benefit in holding RSUs. Again, there is no tax benefit for holding RSUs. Given that RSUs are taxed as ordinary income and there is no tax benefit for holding them, I recommend you sell as soon as you vest and use the proceeds to fund your other financial goals.
Another way to figure when to sell your RSUs is to ask yourself: If I got my company gave me a cash bonus today, would I use it to buy company stock? Deciding when to sell your Restricted Stock Unitss can be hard to figure out. If you would like help developing your RSUs selling action plan schedule a free call with me to talk through your individual situation.
Hi I normally get a cash bonus on RSU. I have given grant acceptance of RSU from April first Now I am quitting my company on Your email address will not be published. Be aware of this difference in your tax planning throughout the year. When you sell the shares, you will pay capital gains tax on any appreciation of the market value from the vesting date when you received the RSU shares. If you sell the shares immediately, before they increase or decrease in value, there will be no capital gains tax due.
If you do hold the shares, then they will be taxed exactly as if you had purchased them on the open market on the day they vested. Generally, investment and tax considerations argue for selling RSU shares immediately or soon after you receive them.
However, there may be circumstances when you will need or want to hold your shares. If you are considered a company insider or possess material non-public information about the company, you may need to hold your RSU shares and other shares of company stock until you are no longer in danger of violating insider-trading laws. If you are at risk for charges of insider trading, you might consider putting in place an SEC Rule 10b trading plan, which helps avoid legal issues.
Because of your familiarity with the technology, customer needs, competitive landscape, market dynamics, or other factors within the industry your company operates, you may have unique insight into the short-term or long-term performance of the company. If you believe your insights are more accurate than those of other stock market participants, including stock analysts, hedge fund managers, and other sophisticated institutional investors, you might decide to hold the stock with the expectation it will increase in value.
This bias occurs when investors prefer familiar or well-known investments, such as stock in the company they work for, instead of a safer and better-diversified portfolio. Then weigh your options, and make an informed decision about whether to sell or keep your RSU shares.
Have questions about when you should sell your RSU shares? Use the form below to ask a question or schedule a complimentary minute discovery call.
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