Q: Should I sell my RSUs? How do I sell my RSUs? Do I need to worry about wash sales? Can you help me out? I get a flood of RSU related questions each and every vesting cycle. Today we will go through a number of different approaches you can take to confidently create a plan on what to do with your RSUs.
I joined Uber about two months ago so have to decide whether to immediately sell the RSUs I'll soon be receiving at a much lower price than what they were when I signed on. Do I receive any tax benefits from selling at this 'loss'? Would it make sense to hold a bit if I anticipate the stock returning to previous levels, or would any gain from this be offset by the short-term capital gains taxes I'd face?
The key thing to remember is that the price of Uber when you received your shares is no longer relevant. It only becomes income at vest, where it then has no additional gain or loss. That definitely doesn't stop if from feeling like a loss though!
Regardless you should be asking yourself at every vest "If uber gave me this amount in cash, would I use the cash to buy Uber shares?" If the answer was yes, then holding makes sense, if no, then selling would be the logical thing.
I wouldn't over think the tax piece either. A gain is always better, even if you have to pay taxes on it. It just goes back to my prior point though, if you were certain Uber would increase, are you also buying more with you paycheck?
Fair point! Appreciate the response. I think my answer is I would probably buy Uber stock if I wasn’t working here, but knowing future RSU vests are coming every month feels like a good enough way to reap any benefits from a future price increase that it’s redundant to also hold onto vested shares.
Can you explain why selling ST loss first than LT loss helps if you have never sold RSUs before ? Isn’t selling LT loss accumulate more realized loss which can be used for tax loss harvesting ?
It really depends on what your ultimate goal is and what you are optimizing for.
If your goal is to capture as many losses as possible you may want to ignore ST or LT and simply sell the shares that will capture the largest amount of losses.
Likewise, if your goal is to sell as many shares as possible without owing taxes. You will probably sell all your losses, and then find which lots of gains will allow you to sell the most overall shares where the total gain can be offset by the losses.
Tax lot optimizer is looking even simpler. Let me sell the most tax inefficient losses first (ST) and save my more favorable (LT) shares for later since if they end up as gains in the future their tax treatment will be much better.
Thanks for the quick response. I have never sold my Rsu from past 5 years. I had Rsu and Espp at a higher price of around 60$ which was grated 2 years back. It’s still vesting. Last year my company switched to vesting shares quarterly. I was in need of money so I sold some shares. But I read your info on wash sale rules and I am worried if I cannot use the loss that I took. Here is my situation.
Assume I have sold 190 shares of the company on nov 15th with a loss off 8K. My next grant of 100 shares is on nov 30th. And the one after that is of 70 shares on Jan 31st. Now if I have to use the 8K loss in future for either offsetting realized capital gains or reducing taxable income by $3000/yr, I need to sell all the 100 stocks that are being vested on nov 30th on dec 1st right ? That way I can still use the 8K loss from nov 15th selling in future for tax Loss harvesting. Please correct me if I am wrong. I might have follow-up questions.
On November 15th you sold 190 shares for a loss of ~$40 per share (keeping numbers round for simplicity).
On November 30th you vested 100 shares, creating a wash sale against 100 of the shares you sold on November 15th. You still have the $3,600 loss ($90x$40), the remaining $4,000 ($40x$100) now gets added to the cost basis of the November 100 shares (increasing the cost by $4,000 so if you sell, you instantly have the $4,000 loss again).
The next part I am a little confused. Are you vesting monthly or quarterly? If your next vest is January 31st and you wanted to still capture the $4,000 loss. You would want to sell any time in December which would capture the loss in 2023 for this years taxes. If you waited until January you might end up with another wash sale from your January 31st vest if it is within 30 days :).
Hopefully that helps you understand it a little more.
On nov 15, I have sold 190 shares. By reselling the vested 100 shares on nov 30th, I understand that the 4000$ loss is realized and can be used for tax loss harvesting. But if I want to also use $3600 from nov 15 selling , do I need to make a purchase of shares worth 3600 and sell it again within 60 day window from nov 15? If I don’t do this, will I be not able to use the $3600 for tax loss harvesting?
In simpler terms, if we have to make use of the loss because of selling , do the total value of loss should be equal to the value of shares bought and sold within the next 60 days window?
The cost basis follows the shares 1:1. So if you sold 190 shares and then vested 100 shares, the 90 shares should be free and clear to claim the loss without any other action. If you want to take the full loss you can sell the full new 100 shares that vested.
"The ideal selling order is exactly like what “Tax Lot Optimizer” uses (ST Losses, LT Losses, LT Gains, ST Gains) with the one addition of also selling your most recent vest if you have losses that you want to capture."
So in many cases selling your most recent lot is going to be most efficient tax wise, after that you can utilize tax lot optimizer.
All of my vested lots are gains only (no losses) so far. Which lot is best to sell to optimize my tax advantage - selling Lot that is LT (gain) OR selling the Lot the day it vested (zero to minimal gain/loss)? Since I do not yet have concern on capturing losses, I am a bit confused on choosing these 2 options (LT gain vs. vesting lot). Thank you so much!
I joined Uber about two months ago so have to decide whether to immediately sell the RSUs I'll soon be receiving at a much lower price than what they were when I signed on. Do I receive any tax benefits from selling at this 'loss'? Would it make sense to hold a bit if I anticipate the stock returning to previous levels, or would any gain from this be offset by the short-term capital gains taxes I'd face?
The key thing to remember is that the price of Uber when you received your shares is no longer relevant. It only becomes income at vest, where it then has no additional gain or loss. That definitely doesn't stop if from feeling like a loss though!
Regardless you should be asking yourself at every vest "If uber gave me this amount in cash, would I use the cash to buy Uber shares?" If the answer was yes, then holding makes sense, if no, then selling would be the logical thing.
I wouldn't over think the tax piece either. A gain is always better, even if you have to pay taxes on it. It just goes back to my prior point though, if you were certain Uber would increase, are you also buying more with you paycheck?
Fair point! Appreciate the response. I think my answer is I would probably buy Uber stock if I wasn’t working here, but knowing future RSU vests are coming every month feels like a good enough way to reap any benefits from a future price increase that it’s redundant to also hold onto vested shares.
Can you explain why selling ST loss first than LT loss helps if you have never sold RSUs before ? Isn’t selling LT loss accumulate more realized loss which can be used for tax loss harvesting ?
It really depends on what your ultimate goal is and what you are optimizing for.
If your goal is to capture as many losses as possible you may want to ignore ST or LT and simply sell the shares that will capture the largest amount of losses.
Likewise, if your goal is to sell as many shares as possible without owing taxes. You will probably sell all your losses, and then find which lots of gains will allow you to sell the most overall shares where the total gain can be offset by the losses.
Tax lot optimizer is looking even simpler. Let me sell the most tax inefficient losses first (ST) and save my more favorable (LT) shares for later since if they end up as gains in the future their tax treatment will be much better.
Thanks for the quick response. I have never sold my Rsu from past 5 years. I had Rsu and Espp at a higher price of around 60$ which was grated 2 years back. It’s still vesting. Last year my company switched to vesting shares quarterly. I was in need of money so I sold some shares. But I read your info on wash sale rules and I am worried if I cannot use the loss that I took. Here is my situation.
Assume I have sold 190 shares of the company on nov 15th with a loss off 8K. My next grant of 100 shares is on nov 30th. And the one after that is of 70 shares on Jan 31st. Now if I have to use the 8K loss in future for either offsetting realized capital gains or reducing taxable income by $3000/yr, I need to sell all the 100 stocks that are being vested on nov 30th on dec 1st right ? That way I can still use the 8K loss from nov 15th selling in future for tax Loss harvesting. Please correct me if I am wrong. I might have follow-up questions.
I think I am understanding your situation.
Think about it like this:
On November 15th you sold 190 shares for a loss of ~$40 per share (keeping numbers round for simplicity).
On November 30th you vested 100 shares, creating a wash sale against 100 of the shares you sold on November 15th. You still have the $3,600 loss ($90x$40), the remaining $4,000 ($40x$100) now gets added to the cost basis of the November 100 shares (increasing the cost by $4,000 so if you sell, you instantly have the $4,000 loss again).
The next part I am a little confused. Are you vesting monthly or quarterly? If your next vest is January 31st and you wanted to still capture the $4,000 loss. You would want to sell any time in December which would capture the loss in 2023 for this years taxes. If you waited until January you might end up with another wash sale from your January 31st vest if it is within 30 days :).
Hopefully that helps you understand it a little more.
Minor edits to keep consistent with my $40 per share loss example.
On nov 15, I have sold 190 shares. By reselling the vested 100 shares on nov 30th, I understand that the 4000$ loss is realized and can be used for tax loss harvesting. But if I want to also use $3600 from nov 15 selling , do I need to make a purchase of shares worth 3600 and sell it again within 60 day window from nov 15? If I don’t do this, will I be not able to use the $3600 for tax loss harvesting?
In simpler terms, if we have to make use of the loss because of selling , do the total value of loss should be equal to the value of shares bought and sold within the next 60 days window?
The cost basis follows the shares 1:1. So if you sold 190 shares and then vested 100 shares, the 90 shares should be free and clear to claim the loss without any other action. If you want to take the full loss you can sell the full new 100 shares that vested.
Is there a time period within which I need to sell the newly acquired 100 shares on nov 31st? Do I have to sell it immediately the next day ?
What to do if you have never sold an RSU (I know, the shame!!). Do you start by selling off the old grants first or the new ones? I’m frozen!
Everyone's specific lots are going to be a little different so this is general advice and not necessary specific to you situation:
Take a look at this section: https://andrenader.substack.com/i/119553664/deciding-which-lots-to-sell
"The ideal selling order is exactly like what “Tax Lot Optimizer” uses (ST Losses, LT Losses, LT Gains, ST Gains) with the one addition of also selling your most recent vest if you have losses that you want to capture."
So in many cases selling your most recent lot is going to be most efficient tax wise, after that you can utilize tax lot optimizer.
All of my vested lots are gains only (no losses) so far. Which lot is best to sell to optimize my tax advantage - selling Lot that is LT (gain) OR selling the Lot the day it vested (zero to minimal gain/loss)? Since I do not yet have concern on capturing losses, I am a bit confused on choosing these 2 options (LT gain vs. vesting lot). Thank you so much!
Shoot me an email at andre@avocadofire.com I have an idea.
Very helpful!