Equity Compensation Strategy
RSU & RSA Tax Planning
RSUs are the simplest form of equity to receive and one of the easiest to get wrong at tax time. We make the vesting calendar work for you.
Restricted stock units are the most common form of equity at public tech companies, and restricted stock awards are common at early-stage startups. Both deliver actual shares rather than the right to buy them, which makes them feel straightforward. The tax treatment is where the complexity hides. RSUs are taxed as ordinary income on the day they vest, at the share price that day, whether or not you sell. Your employer withholds at a flat supplemental rate that is often well below your real bracket, so each vest can quietly build a balance due for April. Then the shares you keep begin a second life as an investment, with their own cost basis, holding period and concentration risk.
RSAs add an early decision. Because the shares are issued at grant, an 83(b) election lets you pay tax on their value now, while it may be small, rather than at each vesting date when the company may be worth far more. The election must be filed within thirty days of the grant, and it cannot be undone. We help you understand both instruments, plan around your specific vesting schedule, and decide at each date whether to sell, hold or diversify, with taxes modeled before the shares ever land in your account.
What we handle
- Vesting schedules and cliff dates, mapped against your expected income for the year
- Tax withholding gaps on supplemental wages, and estimated payments or adjusted withholding to close them
- Sell-to-cover versus hold decisions at each vest, including the case for selling everything on day one
- Cost basis tracking, and the common error of reporting RSU income twice because the broker's 1099-B shows a zero basis
- RSA 83(b) elections at early-stage companies: whether to file, the thirty-day deadline and the risk if shares are later forfeited
- Double-trigger RSUs at private companies and planning for the IPO lockup period
- Concentration in employer stock, and a diversification cadence that fits trading windows and your tax bracket
- Planning for a job change with unvested shares, including negotiating a new grant to replace what you leave behind
How we work together
- 01
Inventory
We collect your grant agreements, vesting schedules, recent pay stubs and brokerage statements, and build a single calendar of what vests when and what it is likely to be worth.
- 02
Modeling
We project the tax on each vest at the federal and state level, quantify the withholding gap, and compare sell-to-cover, sell-all and hold scenarios so you can see the trade-offs in dollars.
- 03
Plan and follow-through
You receive a written vesting plan with a default action for each date and a diversification target. We check in at each vest and hand your CPA a clean summary with the correct cost basis at year-end.
Why work with an independent advisor
We do not earn anything when you sell, hold, trade or move your shares to a particular platform. That matters most with RSUs, where the question is often whether to sell today, and a brokerage or advisor paid on assets has an incentive to keep you invested. Our recommendation is shaped only by your tax picture, your concentration and your goals, and we coordinate with your CPA rather than replacing them.
Frequently asked questions
How are RSUs taxed?
RSUs are taxed as ordinary income when they vest, based on the fair market value of the shares that day. The amount is added to your W-2 wages and subject to federal, state, Social Security and Medicare taxes. When you later sell, any change in price since the vesting date is a capital gain or loss, with the vesting-date value as your cost basis. Nothing is owed at grant, and there is no way to defer the vest-date income.
Why is there still a tax bill in April if my company already withheld shares?
Employers typically withhold federal tax on RSU income at a flat 22% supplemental rate (37% on amounts above $1 million), plus a flat state rate. If your marginal bracket is higher, and for many tech employees receiving meaningful RSUs it is, each vest leaves a gap. We calculate the gap ahead of time and set up estimated payments or extra withholding so the balance due does not surprise you.
Should I sell my RSUs as soon as they vest?
For many people, selling at vest is a reasonable default. Because the shares are already taxed as income, selling immediately creates little or no additional gain, and it converts a concentrated position into cash you can redirect. Holding is a decision to buy your employer's stock at today's price with after-tax money. That can be a fine choice, but it should be made on purpose, with your total exposure to the company in view.
What is the cost basis error on RSUs, and how do I avoid it?
Brokers often report RSU sales on Form 1099-B with a cost basis of zero, or of the amount you paid, which is nothing. If the return uses that figure, the full sale price is reported as a capital gain even though the vest-date value was already taxed on your W-2. The result is paying tax twice on the same shares. We track the correct basis for every lot and provide it to your CPA so the adjustment is made properly.
What is an 83(b) election, and should I file one for my RSAs?
An 83(b) election tells the IRS you want to be taxed on restricted stock at grant rather than as it vests. At an early-stage company where the shares are worth very little today, this can mean paying a small amount of tax now and starting the capital gains holding period immediately. The trade-offs are that the deadline is thirty days from grant, the tax paid is not refundable if you leave before vesting, and it does not apply to standard RSUs. We walk through the numbers with you before the deadline.
My company is private and my RSUs are double-trigger. What should I plan for?
Double-trigger RSUs typically vest for tax purposes only when both a time condition and a liquidity event such as an IPO are met. That means grants from several years can become taxable at once, often while a lockup prevents you from selling to pay the tax. We model the expected income, estimate the withholding shortfall, and build a plan for the lockup period and the sales that follow it. See our equity compensation hub for how this fits with your options and other holdings.
Related services
- Equity Compensation StrategyOne coordinated plan for your RSUs, RSAs, ISOs and NSOs, so every vest, exercise and sale is a decision rather than a surprise.
- Stock Options (ISO & NSO)AMT modeling, holding periods, early exercise, funding and post-termination windows, so every exercise is timed on purpose.
- Proactive Tax StrategyProactive, year-round tax planning so vesting, exercises and bonuses never surprise you in April.
Ready to turn your uncertainty into certainties?
Start with a complimentary 15-minute strategy session. We will look at your portfolio, your tax picture and your goals, and tell you plainly what we would do next.