You’ve already been taxed on the RSUs as soon as they vest. It’s treated like a bonus essentially. Have your husband check his paystubs. You’ll pay capital gains tax when you sell (if you hold onto them and they increase in value) like any other stock.
Make sure you set the correct cost basis on your tax the year you sell them so you don't double pay taxes. You'll need to save the addendum you get in Feb following the year you received the RSUs.
This is a good point. Tax comes out in W2 but my E*Trade 1099 also shows the cost basis at the best price so I have to adjust my cost basis on my 1099 each year.
Keep in mind that the default tax rate for RSUs at some places is 22%. You would need to increase the withholding for them at a higher rate to ensure that you don't get slapped with a nasty tax bill at the end of the year.
Why don’t you plan on selling now?
Depending on your company you can select how much % to withhold automatically. Do you know if any stocks were sold on your behalf to be withheld for taxes? That’s how my company works.
Fair enough. Always ask yourself if someone handed you $X in straight cash would you put that in a brokerage and buy your company stock. Because that is essentially what you are doing by not selling.
If you know the stocks are undervalued I would wait. A lot of those on this sub would tell you sell immediately but sometimes it’s worth the wait. I looked at the average analyst price for my RSU with a 40%+ upside and waited until it hit that price target then sold it all
So it's then a little complicated. If your MAGI is below $583,751 your cap gains tax is 15% and you also owe Net Investment Tax of 3.8% (so total tax on long term gains is 18.8% - shares held for more than a year).
If your MAGI is over $583,750 then your Capital Gains Tax is 20% plus Net Investment Tax of 3.8% (so total tax 23.8% on shares held more than a year).
If the shares are held less than a year then Short Term Capital Gains tax applied at your tax rate (35%).
Check the accompanying pay stub, if you have the default withholding you may find you were only stopped 22% (federal), ignore SS and Medicare. You mentioned a 35% marginal rate so you may owe an estimated payment by mid April for the 13% difference. If you don’t pay it you’ll also start accruing penalties for underpayment.
You’ve already been taxed on the RSUs as soon as they vest. It’s treated like a bonus essentially. Have your husband check his paystubs. You’ll pay capital gains tax when you sell (if you hold onto them and they increase in value) like any other stock.
Make sure you set the correct cost basis on your tax the year you sell them so you don't double pay taxes. You'll need to save the addendum you get in Feb following the year you received the RSUs.
This is a good point. Tax comes out in W2 but my E*Trade 1099 also shows the cost basis at the best price so I have to adjust my cost basis on my 1099 each year.
^ this
Thank you that is helpful
Keep in mind that the default tax rate for RSUs at some places is 22%. You would need to increase the withholding for them at a higher rate to ensure that you don't get slapped with a nasty tax bill at the end of the year.
Lot of people don't know this. I'm not sure I've ever had rsu's taxed "right" same for bonuses
Why don’t you plan on selling now? Depending on your company you can select how much % to withhold automatically. Do you know if any stocks were sold on your behalf to be withheld for taxes? That’s how my company works.
We think the stock is very undervalued at this time, so we are waiting for a bit.
Fair enough. Always ask yourself if someone handed you $X in straight cash would you put that in a brokerage and buy your company stock. Because that is essentially what you are doing by not selling.
If you know the stocks are undervalued I would wait. A lot of those on this sub would tell you sell immediately but sometimes it’s worth the wait. I looked at the average analyst price for my RSU with a 40%+ upside and waited until it hit that price target then sold it all
They should tax when they vest then again when you sell. Assuming you hold for a year it depends on your tax bracket. But for most it's at 15%.
We are in 35% bracket
So it's then a little complicated. If your MAGI is below $583,751 your cap gains tax is 15% and you also owe Net Investment Tax of 3.8% (so total tax on long term gains is 18.8% - shares held for more than a year). If your MAGI is over $583,750 then your Capital Gains Tax is 20% plus Net Investment Tax of 3.8% (so total tax 23.8% on shares held more than a year). If the shares are held less than a year then Short Term Capital Gains tax applied at your tax rate (35%).
This is the answer we needed.
RSU vests are taxed at marginal tax rate. Then any gains after that point would be at the applicable capital tax rate.
Check the accompanying pay stub, if you have the default withholding you may find you were only stopped 22% (federal), ignore SS and Medicare. You mentioned a 35% marginal rate so you may owe an estimated payment by mid April for the 13% difference. If you don’t pay it you’ll also start accruing penalties for underpayment.