Should I sell RSU shares immediately at vesting?

From a tax perspective, selling immediately has no disadvantage since you have already paid income tax on the full vesting value. From a diversification perspective, many advisors recommend selling immediately to avoid concentration risk — both your income and investments tied to one company. If you hold, only post-vesting appreciation generates additional capital gain.

What is the difference between ISO and NSO capital gains treatment?

NSOs generate ordinary income at exercise (spread = ordinary income) and capital gains on post-exercise appreciation. ISOs can generate purely capital gains treatment in a qualifying disposition — no ordinary income at exercise, all gain classified as long-term capital gain if held long enough. However, ISOs carry AMT risk at exercise that NSOs do not.

How does the 83(b) election help with capital gains?

If you receive unvested stock (common for founders and early employees), an 83(b) election within 30 days of grant lets you pay ordinary income now on the current (often near-zero) value. All future appreciation after the election date is then capital gain — at the preferential 0%/15%/20% rate rather than ordinary income rates. Without the election, all appreciation through vesting is ordinary income.

Can I harvest losses from RSU shares to offset capital gains?

Yes. If you hold RSU shares after vesting and they decline below your vesting-day basis, you can sell at a loss and harvest the capital loss to offset other capital gains. This is a standard tax-loss harvesting strategy — just ensure you do not repurchase the same company stock within 30 days (wash sale rule applies).

What happens to my stock options or RSUs if my company is acquired?

Acquisition treatment varies by deal structure and your grant terms. Options may vest immediately (acceleration), be converted to acquirer options at a conversion ratio, or be cashed out at a fixed price. RSUs may vest and convert to cash or acquirer shares. The tax treatment depends on the specific transaction structure — consult a tax professional when an acquisition is announced.

Capital Gains Tax on Stock Options and RSUs: Employee Equity Guide

Employee stock options and RSUs are among the most complex compensation types for tax purposes. NSOs create ordinary income at exercise plus capital gains on appreciation. ISOs can qualify for full capital gains treatment but carry AMT risk. RSUs vest as ordinary income with capital gains only on post-vesting appreciation.

RSU Taxation: Simple but Often Misunderstood

Restricted Stock Units (RSUs) vest as ordinary income. The fair market value on the vesting date is included in your W-2 as wages. Your cost basis for future sales is the FMV at vesting. Any post-vesting appreciation is capital gain — long-term if held more than 12 months from vesting.

RSU tax events and treatment

Event	Tax Treatment	Rate
RSU vesting date	FMV as ordinary income — included in W-2	10-37% ordinary income rate
Sell same day as vesting	No additional gain if price unchanged	No capital gain
Sell 6 months after vesting at higher price	Additional gain is short-term capital gain	Ordinary income rate
Sell 13 months after vesting at higher price	Additional gain is long-term capital gain	0%/15%/20%

ISO vs NSO: The Capital Gains Distinction

Non-Qualified Stock Options (NSOs): spread at exercise is ordinary income included in W-2. Any post-exercise appreciation is capital gain. Incentive Stock Options (ISOs): no ordinary income at exercise (but spread is an AMT preference item). In a qualifying disposition (hold 2+ years from grant and 1+ year from exercise), all gain is long-term capital gain.

⚠️ISO AMT Risk at Exercise

Exercising a large ISO grant can trigger AMT even without selling shares. The spread at exercise is an AMT preference item. If the stock declines after exercise, you may owe AMT on gains that no longer exist. Model AMT exposure carefully before exercising large ISO blocks.

RSU: ordinary income at vesting; capital gain on post-vesting appreciation
NSO: ordinary income at exercise (W-2); capital gain on post-exercise appreciation
ISO qualifying disposition: all gain as long-term capital gain; no ordinary income
ISO disqualifying disposition: spread at exercise becomes ordinary income
83(b) election for unvested stock: ordinary income now on low value; all future appreciation is capital gain

Holding Period Planning for Maximum Capital Gains Treatment

For RSUs: 12 months from vesting date for long-term capital gains on post-vesting appreciation. For NSOs: 12 months from exercise date for long-term capital gains on post-exercise appreciation. For ISOs qualifying disposition: 2 years from grant date AND 1 year from exercise date. Each requirement is strict — missing by even one day converts to short-term or ordinary income treatment.

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Frequently Asked Questions

Capital Gains Tax on Stock Options and RSUs: Employee Equity Guide

RSU Taxation: Simple but Often Misunderstood

ISO vs NSO: The Capital Gains Distinction

Holding Period Planning for Maximum Capital Gains Treatment

Frequently Asked Questions

Frequently Asked Questions

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