Should I Sell My RSUs When They Vest? (Usually, Yes)

For most people, the answer to whether you should sell your RSUs when they vest is yes: selling at vest costs you almost nothing in extra tax, and holding is the same decision as taking a cash bonus and buying your employer's stock with all of it. Hold only the shares you'd be happy to buy with cash today.

Quick Answer: Sell most or all of your RSUs when they vest unless you'd deliberately buy that much company stock with cash. You already owe income tax on the full value at vest, so selling right away adds little or no capital gains tax. Keep any single stock under about 10% of your investments, and save for the tax withholding missed.

How are RSUs taxed when they vest?

RSUs are taxed as ordinary income on the day they vest, based on the shares' market value that day. The IRS treats restricted property as compensation once it's yours, so it shows up on your W-2 just like salary, with Social Security and Medicare on top.

Let's say 400 shares vest at $125. That's $50,000 of income, whether you sell a single share or not. The value on vest day also becomes your cost basis, which is the part people miss. If you sell the same day at $125, your gain is zero, so there's no capital gains tax to pay.

That's why "should I sell?" is really a different question in disguise. The tax on the $50,000 is already locked in. The only thing still up for decision is whether you want $50,000 sitting in one company's stock.

Why does selling at vest usually make sense?

Selling at vest usually makes sense because holding is a bet you'd probably never place on purpose. Here's the test we like: if your employer handed you $50,000 in cash instead of shares, would you spend all of it buying their stock? Almost nobody says yes.

And yet holding vested RSUs is exactly that trade. Plus, your job already ties your income to the same company. If the business has a rough year, the stock can fall right when layoffs come, and you'd take both hits at once.

Concentration is the risk that doesn't show up until it does. A common planning guideline is to keep any single stock under 10% of your investments. The SEC's investor education site explains why diversifying beats concentrating in one holding: you're far less likely to lose a big chunk of your money to one company's bad news.

Selling and moving the cash into a broad index fund turns a one-company bet into a share of thousands of companies. We compare two simple ways to do that in index funds vs target date funds.

Will your withholding cover the tax on your RSUs?

Often it won't. Employers usually withhold federal tax on RSUs at the flat 22% rate for supplemental wages (37% above $1 million a year), per IRS Publication 15. If your real bracket is higher than 22%, you'll owe the difference in April.

Let's run it. You're 31, single, earning $190,000, with a $50,000 vest. After the 2026 standard deduction of $16,100, your taxable income lands around $223,900. Under the 2026 federal brackets, the 32% rate starts at $201,775 for single filers.

• Tax actually owed on the vest: about $22,125 at 32% plus $27,875 at 24%, or roughly $13,770.
• Withheld at 22%: $11,000.
• Federal shortfall: about $2,770, before any state tax.

Selling at vest makes this easy: set the shortfall aside in savings the same day. If you'd rather fix it through your paycheck, our guide on adjusting your W-4 shows how to add extra withholding.

Is holding for long-term capital gains worth it?

Usually not, because the tax break only applies to growth after vest, not to the $50,000 itself. Shares held more than a year past vest qualify for long-term capital gains rates of 0%, 15% or 20%. Sell sooner and any gain is taxed as ordinary income.

Say you hold the $50,000 for a year and it rises 20% to $60,000. On that $10,000 gain, short-term tax at 32% is $3,200. Long-term at 15% is $1,500. Waiting saves you $1,700.

Now flip it. If the stock drops 30% during that year, you've lost $15,000 to save a possible $1,700. The tax savings are real, but they're small next to the swing in a single stock. Hold for the tax rate only if you'd want the shares anyway.

When does it make sense to keep some RSUs?

Keeping some shares is reasonable when all three of these are true, and it depends less on your view of the company than on the rest of your money.

• The position stays small. Company stock, including unvested shares you expect, sits under about 10% of your investable money.
• Your base is covered. You have a full emergency fund, no credit card debt, and your retirement contributions are on track.
• You'd buy it with cash. You've looked at the company the way an outside investor would, and you'd choose it over an index fund.

Plenty of people split the difference: sell enough at each vest to cover the tax and fund their goals, and keep a slice as a deliberate bet. If you're weighing what to do with the proceeds, the same logic as saving or investing a bonus applies, and our breakdown of a house fund versus investing helps if a down payment is the goal.

What tax mistakes should you avoid when you sell RSUs?

The two that cost people real money are double-counting income and tripping the wash sale rule. Both are easy to avoid once you know they exist.

Check the cost basis on your 1099-B. Brokers sometimes report RSU shares with a $0 or incomplete basis. If you file it that way, you pay tax on the $50,000 twice: once on your W-2 and again as a "gain." The Form 8949 instructions explain how to correct the basis to the vest-day value.

Watch the 30-day window on losses. If you sell shares at a loss within 30 days before or after another vest, the new shares can trigger the wash sale rule in IRS Publication 550, which defers the loss. With quarterly vests, that window comes around often, so time loss sales with your vest calendar in view.

Frequently Asked Questions

Do I pay taxes twice on RSUs?

You shouldn't. You pay ordinary income tax on the value at vest, and that value becomes your cost basis. You only owe capital gains tax on growth after vest. Double taxation happens when the basis on your 1099-B is reported as $0 and you don't correct it on Form 8949, so always check that number before filing.

What does "sell to cover" mean for RSUs?

Sell to cover means your employer's broker automatically sells just enough shares at vest to pay the withholding, usually at 22% federal plus state, and deposits the rest of the shares in your account. It handles the withholding, but it doesn't decide anything about the shares you keep, and it may still leave you short at tax time.

What happens to unvested RSUs if I leave my job?

In most plans, unvested RSUs are forfeited when you leave, while vested shares stay yours. Some companies accelerate vesting in an acquisition or layoff, so check your grant agreement. This is one reason unvested RSUs shouldn't count fully in your net worth or your plans until they actually vest.

Should I sell RSUs at a private company?

You usually can't. Private company RSUs often use a double-trigger structure, where shares only settle after both a time vest and a liquidity event like an IPO. Once they settle and become sellable, the same logic applies: the income is taxed at settlement, and the question is whether you'd buy that much stock with cash.

The Takeaway

Treat every vest as a cash bonus that arrived in your employer's stock, and at Planned we recommend asking one question each time: would I buy this much of this company today? If the answer is no, sell, set aside the tax gap, and put the rest to work on the goals you already have.