I'm about to vest my cliff for my RSU grant and it should be around $10k which I plan on selling immediately to reinvest into my brokerage account (which is VTI/VXUS). I then get quarterly vests of 6.25% which for the time being, I plan on selling upon vesting.

Eventually, once I beef up my diversified investments and cash savings I do want to keep some of the stock I get vested and sell others. So maybe every other vesting period I'll hold. I work for a well-established company that I think is in a good position for future growth so I'm not averse to keeping some shares held in their stock.

My question is with regard to taxes, if I am selling upon vest every other vest period does the brokerage determine which shares I am selling? Is it possible to sell the newly vested shares only so I am not paying cap gains on the shares I am holding? Or is it all or nothing? Or am I completely misunderstanding how selling works?

Thanks!

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iranisculpable t1_iui8h38 wrote on October 31, 2022 at 3:10 PM

Your broker should let you select specific lots of shares to sell.

grokfinance t1_iui8jry wrote on October 31, 2022 at 3:10 PM

There are two taxable events. First, when your RSUs vest they count as income that you will have to report and pay tax on regardless of if you sell the shares or not.

Then, if you don't sell the shares you'll also owe capital gains tax on any profit between when you eventually sell and the value on the date they vested. Check with the broker to see how they account for the shares - FIFO (first in first out) or LIFO (last in first out) - or possibly, specific ID. You might be able to change that.

https://www.schwab.com/public/eac/resources/articles/rsu_facts.html#:~:text=Taxation,any%20state%20and%20local%20tax.

DeluxeXL t1_iui8j0k wrote on October 31, 2022 at 3:10 PM

> My question is with regard to taxes, if I am selling upon vest every other vest period does the brokerage determine which shares I am selling?

Default cost basis accounting is First In First Out (FIFO). You can change it to specify which shares to sell.

> Is it possible to sell the newly vested shares only so I am not paying cap gains on the shares I am holding?

Yes. Switch to Specific Identification (Spec ID) or Last In First Out (LIFO) or Highest Cost First Out (HIFO) or Tax Optimized or whatever else the brokerage offers that makes sense.

Hotwater3 OP t1_iuiaq5s wrote on October 31, 2022 at 3:25 PM

Thanks for the insights everyone. I've never actually sold shares before, only purchased, so this is helpful!

micha8st t1_iuiftdt wrote on October 31, 2022 at 4:00 PM

You can specify which lots to sell.

I've never sold my RSUs immediately, but I have sold to diversify, and I have told the brokerage exactly which lots (vestings) I'm selling.

Just as a test, I put in a sell order (I'm previewing it now), and I've told it to sell 1 share from each of 12 different lots. 12 total shares. But that's the software provided by the brokerage my company has selected. Yours may vary.

Time to go hit cancel.

WantToRetireSomeday t1_iuix1h6 wrote on October 31, 2022 at 5:54 PM

Most brokerages will sell to cover upon vest (before they release the remaining shares to you).

You have to decide if you want to sell to cover, or send a check to your HR.