Q: Let’s start with the basics. How are RSUs Vested actually taxed, and where do people get surprised?
The vesting event itself is ordinary income. Whatever the shares are worth the day they vest gets added to your W-2 as income, taxed at your regular rate. After that, any gain or loss from the vest price is capital gains, short or long term depending on how long you hold. The surprise usually isn’t the mechanics. For many executives, the mandatory federal withholding on RSUs isn’t enough to cover their actual marginal tax rate. If you’re in the 32%, 35%, or 37% bracket, you may still owe a meaningful amount when you file your return. Don’t forget state income taxes, which can widen that gap even further. We prefer our clients don’t have tax surprises in April.
Understanding how RSUs Vested impacts your tax situation is crucial for effective financial planning.
Q: The default move for most executives is to sell everything the moment RSUs Vested. Is that actually the right call?
It’s the easiest call, which isn’t the same thing. Selling at vest locks in the tax you already owe and removes the position from your balance sheet. For a lot of people, that’s genuinely fine. But if you sell without ever asking the question, you’re not making a decision. You’re defaulting into one. The version of this that costs people money is when they sell at vest every single time, for years, without ever asking whether holding some of it made sense for their diversification or their tax picture that particular year.
Q: What does holding after vest actually do to someone’s risk profile?
It concentrates you further into a single company you’re already exposed to through your salary and your career. That’s the tradeoff nobody names clearly enough. Remember, the tax decision and the investment decision aren’t always the same decision. Just because selling may create a tax consequence doesn’t automatically mean holding is the better investment choice. Likewise, minimizing taxes shouldn’t come at the expense of taking on more concentration risk than you’re comfortable with. Holding might make sense if you have a strong conviction in the business, you’re intentionally accepting the added concentration risk, or you’re in an unusually low-income year where the future tax implications are favorable. But in many cases, executives already have enough exposure through their salary, bonuses, and existing company stock. The decision should start with concentration risk, not emotion.
Q: 2026 was volatile early on. What should someone with equity that vested during that window be looking at right now?
Anyone whose shares vested when prices were higher and then dropped is sitting on two things worth exploring: whether they’re holding a position that’s now more concentrated than they intended, and whether there’s an unrealized loss that could offset capital gains elsewhere in the portfolio. Many executives focus solely on their company stock without looking at how it fits into the rest of their investment strategy. Both of those windows close as the year goes on. August is the right time to actually run the numbers instead of guessing.
Q: For someone with vesting events coming in Q4, what should they be doing right now?
Know your vesting dates and roughly what income they’ll create. That income stacks on top of your salary and bonus, and can push more income into higher marginal tax brackets. Decide in advance what you’re going to sell and what you’re going to hold, and have that conversation with your advisor before the shares land, not after the tax bill does.
Q: Is there a rule of thumb for how much to sell?
Not really. We usually start with one question: If your employer paid you a cash bonus instead of company stock today, would you use that cash to buy shares of your own company? If the answer is no, that’s a good indication holding every vested share may not align with your investment strategy.
For many executives, the answer ends up being somewhere in the middle. Sell enough to reduce concentration risk, meet liquidity needs, and diversify, while holding only the amount that still fits within your long-term investment plan.
Q: What’s the most expensive mistake you see executives make with equity comp?
Treating every vest the same way, every year, without ever revisiting the plan. Markets change. Your income changes. Your concentration changes. A strategy that made sense three years ago might be costing you money right now, and the only way to know is to actually look. That’s the conversation worth having before Q4, not after.
The executives who get the most out of their equity compensation aren’t the ones with the biggest packages. They’re the ones who treat every vesting event as a decision, not something that just happens to them.
The goal isn’t to avoid taxes. The goal is to make intentional decisions about taxes, risk, and diversification before your shares vest, instead of reacting afterward.