Receiving Restricted Stock Units (RSUs) as part of your executive pay at a public company is significant, but those tax details can get messy fast. How do you make the most of your RSUs without the IRS taking a huge bite? Let’s break down some practical, no-stress ways to handle your RSUs and keep your tax game strong, with a few questions to guide your next moves.
Understanding the Breakdown on RSU Taxes
When your RSUs vest, the value gets taxed as regular income based on the stock’s market price that day. This can seriously bump up your income and maybe even push you into a higher tax bracket.
- Have you checked how your vesting schedule messes with your yearly income?
- Could you team up with a financial advisor to shuffle things like bonuses or other income to spread out the tax hit?
Sell Now or Hang On?
Once your RSUs vest, you’ve got a choice: sell the shares right away to cover taxes and pocket some cash or hold onto them for potential bigger gains later (which might score you lower capital gains taxes). But holding comes with risks—if the stock price drops, or if you’re too tied to your company’s stock, you could take a hit.
- How much of your portfolio is riding on your company’s stock, and are you comfortable with that risk?
- Ever thought about selling in chunks to diversify while keeping taxes manageable?
Smart Tax Moves
Weaving RSUs into your bigger financial plan can save you some serious tax dollars. For example, gifting appreciated shares to a donor-advised fund can cut your taxable income while doing some good. Or try tax-loss harvesting to balance out gains. Trusts might also fit into your estate planning vibe.
- Did you know donating RSUs to a donor-advised fund could give you a bigger tax break in the year you gift?
- What other tax tricks have you looked into for handling big vesting moments?
Stay Ahead of Tax Law Changes
Tax rules aren’t set in stone, and shifts could change how your RSUs get taxed. Chatting regularly with a CPA who knows executive compensation inside out keeps you ready for whatever’s coming, whether it’s a big vesting event or new regulations.
- Are you working with a tax advisor to stay on top of potential policy changes?
- How’s your plan shaping up for upcoming vesting events?
Managing RSUs is all about balancing today’s tax bills with building wealth for tomorrow. By asking the right questions and planning smart, you can make those RSUs work harder for you. What’s your next step to get your RSUs in line?
