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0 pointssokoloff7y ago0 comments

> The tax consequences are the same if you hold them

The gains that occur after vest-and-release are capital gains. Capital gains for assets held over a year are much lower than ordinary income rates for most people receiving RSUs. (It's still reasonable advice to diversify in the typical case.)

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alex_young7y ago

I think I'm either misreading your comment, or there's a misunderstanding here.

When RSUs are issued, they typically appreciate in value due to either an increase in share price or a discount or both.

When the RSUs vest, one of 2 things happens: either the number of shares is reduced by a sum equivalent to pay income taxes, or (more rarely) income taxes are paid by the recipient later at tax time. In either case, the shares didn't exist in the recipient's account before that vesting date.

If the shares are sold, those funds can be used to buy other shares if desired. If they are held, they are just normal shares in that company. In either case, they appreciate as capital gains instead of income, starting with the point in time when they were either purchased or vested whichever the case may be.

sokoloffOP7y ago

When the RSUs vest, what typically happens is both of the things you describe. A number of shares is withheld at vesting and the value sent to the Treasury as an income tax withholding. The following April, you true-up the full tax liability with the full number of shares treated as ordinary income. (The withholding is typically at the supplemental wage rate [22%, used to be 25%], which is frequently not enough to cover the full amount of tax due.)

Your initial comment suggested that you didn't distinguish between the ordinary income and capital gains taxation for the pre and post time periods. It turns out you did understand that distinction, but I didn't glean that from your prior text.