Does RSU Vesting Impact Wash Sales?
Looking at Specific Meta RSUs in 2025 to Understand Wash Sales
One fun part of writing about FAANG RSUs during a year of high volatility is that I get more opportunities to talk about one of my favorite subjects: the often misunderstood wash sale!
This is particularly timely because many of you have some of your RSU vests this year while also sitting on a capital loss, meaning the current value is lower than the value on vest.
Live RSU Workshop
I’ll be hosting a live RSU Workshop for paid subscribers Friday May 16th at 12pm PST. I’ll be going through the fundamentals of RSU vesting, wash sales, and holding an open Q&A.
The May 16th event is now waitlisted! If you are a paid subscriber you can still request to join below. Due to the demand, I created a second free RSU Workshop for May 23rd!
Before your eyes glaze over, let’s jump into an example:
Meta Q1 RSU Vest on February 15th 2025.
Price on Vest: $736.67
Current Share Price: ~$600 as of 5/8/2025
Current Loss Per Share: $136.67
Shares Vested: 100
Value on Vest (i.e., Cost Basis): $73,667
Current Value: $60,000
In this example the Meta employee has 100 shares that vested February 15th. They decided they want to diversify into index funds instead of holding individual shares in the company they work for.
The trading window opened after Q2 earnings and the Meta employee sold all 100 shares the next day.
Sell Q1 Meta Shares for a Loss
Date: May 3rd, 2025
Shares Sold: 100
Sale Price per Share: $600
Total Value: $60,000
Cost Basis: $70,000
Gain/Loss: -$13,667 loss
They now have $60,000 in cash in their Schwab account. They also have $13,667 in short term capital losses. They can use these $13,667 to offset gains somewhere else in their portfolio. If they have no gains in 2025 to offset, they can reduce their taxable income by up to $3,000. If their marginal tax bracket is 35% that will save them $1,000. Any unused losses beyond the $3,000 will carry forward to be used in future years.
This is called Tax Loss Harvesting.
So the Meta employee is annoyed their stock is down, but at least they harvested some losses.
Not so fast!
On May 15th, the Meta employee has 100 more shares vesting. Since this vest is within 15 days from when they sold the Meta shares for a loss, a wash sale will be triggered.
What is a Wash Sale?
The IRS doesn’t want you to sell a stock for a loss and then immediately buy it again. So they developed the wash sale rule to prevent this. If a wash sale occurs, you don’t get to claim the loss (the loss is disallowed). The “gotcha” for employees that are compensated with stock is that RSU vests and ESPP purchases count as purchases which will trigger a wash sale.
Let’s go straight to the IRS (PDF) with the explanation:
“A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
In order to navigate wash sales it is important to understand what actually happens when you trigger one. A wash sale doesn’t fully eliminate the loss, it just disallows it in the moment. The mechanism they use to disallow it is that they make you take the loss and add it to the cost basis of the new purchase that triggered the wash sale.
On May 15th, when the Meta employee vests their Q2 RSUs, the wash sale rule gets triggered.
Q2 Vest Details
Price on Vest: $600 (I am writing this before 5/15, so the specific number isn’t correct).
Shares Vested: 100
Value on Vest ie the Cost Basis: $60,000
Adjusted Cost Basis due to Wash Sale: $73,667 ($60,000 + $13,667)
Due to the wash sale, the Meta employee no longer has the $13,667 in losses already realized.
The loss isn’t gone!
It has been added to the cost basis of the newly vested shares. Normally your new RSU vest would have near $0 in gains on vest, however due to the wash sale they start with $13,667 in losses right off the bat.
If they don’t sell any additional shares of Meta, they will end 2025 without any capital losses or gains from their Meta shares.
However, if they sell the newly vested shares, the ones that caused the wash sale, they will recapture the loss!
Selling Meta Q2 Shares
Date: May 18th, 2025
Shares Sold: 100
Sale Price per Share: $600
Total Value: $60,000
Adjusted Cost Basis: $73,667
Gain/Loss: -$13,667 loss
Wash sales are complicated. Just try to remember the main mechanisms at play. Any losses from a sale will get added to the cost basis of any newly purchased (or vested) shares 30 days before or 30 days after.
A Few More Wash Sale Examples
Does the Order of Sales Matter?
What about if you vest your new shares on May 15th, then sell your old shares for a loss on May 20th?
A wash sale is triggered 30 days before or after. So the loss, even though it occured after the vest, would be disallowed. With the loss getting added back to the cost basis of the May 15th vest.
How Do Wash Sales Work if the Number of Shares is Different?
Example with 90 Shares Sold at a Loss Followed by 100 RSUs Vesting
In the first example the Meta employee had 100 shares in both vests. What if they only had 90 shares sold at a loss followed by 100 shares vesting triggering the wash sale?
In this example the RSU vest will trigger a partial wash sale and disallow the full loss.
Partial Wash Sale: A partial wash sale occurs when the number of shares bought or vested within the 30 day window doesn’t match exactly.
Since 90 shares were sold at a loss, 90 shares of the new RSU vest will have the loss added to their cost basis, leaving the remaining 10 shares unchanged
Example with 100 Shares Sold at a Loss Followed by 90 RSUs Vesting
The opposite can also occur. If you sold 100 shares at a loss followed by 90 shares vesting. The 90 shares would have their cost basis adjusted, but you would still have the loss from the 10 shares even without any further sales.
What If My Shares Vest Monthly?
This is a funny example. One that is common for Google and Uber employees who have monthly vesting cycles. Unlike with quarterly vesting, if you can only sell on the day after vest, you will never have a 31 day period to break the wash sale cycle until you leave the company.
I actually want to write a full post on this topic, so be on the lookout for that later this month!
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As someone who didn't sell the Q1 vest and are considering selling this time, this is the exact situation I am in. What a timely post! Super helpful as always
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