So last summer I had my first (year 1) batch of RSUs vest through my company. The original grant was for $15k year 1, 15k year 2, 15k year3 and is/was set to “Sell to Cover” taxes upon vesting. Which means after it vested, shares were sold to cover the tax burden and so what I actually received was ~$10k in proceeds into my individual account. Once the funds were in my individual account, I sold them immediately to transfer the money into another brokerage.
I'm doing my taxes and see I'm getting hit with a ~$5k tax bill (had some other LT gains to go along with it, but only a few thousand).
So I have two main questions about RSUs. If I sell my shares immediately after vesting, is that considered short term gains since I didn't physically hold it for 1 year and therefore being taxed as income? I had thought (probably incorrectly) that the vesting schedule would mean everything is already long term upon vesting (1y, 2y, 3y schedule) but maybe not since I didn't physically hold shares but instead the “right” to shares”?
Second question, upon vesting and paying the taxes, is my initial cost basis zero or the vested amount? I would've figured (again probably incorrectly) that since I had “Sell to Cover” for a tax strategy, that the vested amount (after taxes) would be considered mine and therefore would be my cost basis. Of course any gains from there would be taxed accordingly upon selling. However, my tax form is showing a cost basis of 0 which means I'll be paying income tax on the entire after tax vested amount. Is that right? Did I mess this up?
Thanks for the help, thinking I made a mistake by selling my shares and now paying the price come tax time cause I didn't understand RSUs well enough.
Any insights would be appreciated.
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