What to Do With Your RSUs: Taxes, Selling, and Diversifying

What should you do with your RSUs?

For most people, the default is to sell RSUs (restricted stock units) when they vest and move the money into a diversified portfolio, unless you have a specific reason to hold. When RSUs vest, the full market value counts as ordinary income, so holding the shares afterward is a separate bet on your employer's stock, on top of the paycheck and career you already have tied to it. Decide three things in advance: how much company stock you are willing to own, which vests you will sell, and how you will cover the tax bill.

This post covers the US tax basics, a sell-plan template you can copy, and prompts that let AI do the arithmetic and organize your questions. It is general education, not personal tax or investment advice. Your state, income, and company rules change the answer.

How are RSUs taxed?

This section describes the US system. If you work elsewhere, the structure may differ, and you should ask a local adviser.

1. At vest: The fair market value of the shares on the vest date is treated as compensation, like salary. It appears on your W-2. You owe federal income tax, Social Security and Medicare tax, and usually state and local tax on it.
2. Withholding: Most employers withhold federal tax on RSU income at the flat supplemental rate (22% for supplemental wages up to $1 million in a year, higher above that). They often do this by selling or withholding some of your shares, called "sell to cover" or "net share settlement."
3. After vest: Your cost basis is the vest-day value. If you sell later for more, the gain is a capital gain. Held one year or less after vest, it is short-term and taxed like ordinary income. Held longer than a year, it is long-term and taxed at lower capital gains rates. If you sell for less, you have a capital loss.

Two points trip people up.

Withholding is not your actual tax rate. If your marginal federal bracket is higher than the withholding rate, you owe the difference when you file. People in the 32%, 35%, or 37% brackets are the usual victims. Higher earners may also owe the additional Medicare tax and, on investment gains, the net investment income tax.

The stock is double-counted if you forget the basis. Brokers sometimes report a cost basis of zero on the 1099-B for shares sold to cover. If you report that as is, you pay tax twice on the same money. Check that the basis matches the vest-day value.

Should you sell RSUs when they vest?

Often yes, and here is the reasoning.

When shares vest, you effectively received cash and bought your employer's stock with it. Selling the same day is the same as taking cash and not buying. Asking "should I sell?" is really asking "if I had this amount in cash, would I choose to buy this stock?" Framed that way, many people say no, because their paycheck, bonus, future grants, and job security already depend on the company.

Reasons to sell at vest:

• Almost no tax drag. With basis equal to the vest price, a same-day sale produces little or no gain.
• Diversification. One company can drop sharply even when the economy is fine, and layoffs tend to arrive when the stock is down.
• Simplicity. Fewer lots to track, fewer wash sale and holding period questions.
• Planning for the tax bill. Selling gives you cash to cover what withholding missed.

Reasons you might hold some:

• You are below the concentration limit you set for yourself.
• You want long-term capital gains treatment on future appreciation (you accept the risk to get it).
• You are restricted from selling during a blackout window (see the insiders section below).
• You have a strong, specific reason to be an owner, and you've sized the position so a bad outcome would not change your life.

Waiting for long-term capital gains treatment is a common trap. Holding a year to save tax on a gain only makes sense if you were already happy owning the stock. A 15% to 20% tax saving does not offset a large price drop.

How much company stock is too much?

There is no official number. A commonly cited rule of thumb among financial planners is to keep any single stock to roughly 5% to 10% of your investable net worth, though some people choose more. Count what you already own: shares from past vests, employee stock purchase plan (ESPP) shares, vested options, and anything in your 401(k).

Also think about correlation. Your salary, bonus, unvested RSUs, and promotion prospects already rise and fall with the company. Your real exposure is larger than the shares in your brokerage account.

A simple way to decide:

1. Add up the value of all company stock you own, vested.
2. Add up your investable assets (brokerage, retirement accounts, cash beyond your emergency fund).
3. Divide the first by the second.
4. If the result is above your limit, the next vests are sold until it falls under.

How can AI help you plan RSU taxes and diversify?

AI is useful for four jobs here: turning your vesting schedule into a calendar of tax events, estimating the gap between withholding and what you will probably owe, building a sell rule, and preparing sharp questions for a tax professional. It is a poor choice for being the final word on your tax return.

Protect your data first

Don't paste your Social Security number, account numbers, employer name, or login details. Round the figures if you like. Replace the company with "my employer." Check your employer's policy on putting company information (including unreleased financial data) into AI tools. For grant details, the numbers from your own equity portal are enough.

The prompt

Paste this, filling in the brackets from your equity portal and last pay stub:

You are helping me plan the taxes and diversification of my RSUs. I am in the United States. This is for education and planning, not a final tax answer. State your assumptions and flag anything you are unsure about.

My situation:
- Filing status: [single / married filing jointly]
- State: [state]
- Estimated annual salary + bonus (excluding RSUs): [amount]
- Estimated total household taxable income this year: [amount]
- Federal tax withheld on RSU vests: [flat supplemental rate / net share settlement / unsure]
- Vest schedule (date, shares, estimated price): [list]
- Company stock I already own (vested shares, ESPP shares, current value): [amount]
- Other investable assets (brokerage, retirement, cash beyond emergency fund): [amount]
- Upcoming big expenses or goals in the next 3 years: [list]

Please:
1. Estimate the ordinary income each vest adds and which federal bracket it likely lands in.
2. Estimate the gap between what is withheld and what I will probably owe, and show the math.
3. Tell me what my company stock is as a percentage of my investable assets now, and after each vest if I keep every share.
4. Propose three sell rules (sell all at vest, sell to a target percentage, sell in tranches) and show the tradeoffs for my numbers.
5. List the documents I should check to confirm your numbers (W-2, 1099-B, equity portal statement, pay stub).
6. List five questions to ask a CPA or fee-only financial planner.

What to check in the answer

• The bracket math. Ask the AI to show each step. Compare to the current IRS bracket tables for your filing status, because AI tools can use outdated tables.
• Whether it treated RSUs as ordinary income at vest. If it suggests a capital gains rate on the vest itself, it's wrong.
• State and local taxes. These are the easiest to get wrong or leave out. Ask which state rules it assumed.
• Your basis. Confirm it used the vest-day price, not the grant price.
• Any date or threshold it states as fact. Verify on the IRS site or with a professional.

Where not to trust AI

• Final tax numbers for filing. Use tax software or a CPA.
• Predictions of where the stock will go. Nobody can offer those, including a model.
• Special situations: stock held in a foreign country, alternative minimum tax (AMT) questions with options, equity from an acquisition, or insider trading restrictions. These need a professional.
• Anything about your company's plan rules. Read the plan documents and equity portal.

What does this look like with real numbers?

These figures are made up to show the mechanics. Your numbers will differ.

Maya, filing as single, has 400 RSUs vesting at a stock price of $120.

• Vest income: 400 × $120 = $48,000, added to her W-2.
• Federal withholding at 22%: $10,560.
• Her actual marginal federal bracket: 35%. The 13-point gap on $48,000 is about $6,240 she may owe at filing, before state tax and any additional Medicare tax.
• If she sells all 400 shares at $120: no gain, no loss. She has cash to cover the shortfall.
• If she holds and the price rises to $140 by sale: $8,000 of short-term gain (400 × $20), taxed as ordinary income if sold within a year.
• If she holds and the price falls to $90: a $12,000 capital loss (400 × $30). She still owes tax on the full $48,000 she was credited at vest.

That last line is the one people miss. The tax is owed on the value at vest, even if the price later collapses.

The prompt above would also tell Maya her stock share of investable assets. If she already holds company stock worth 25% of her portfolio, selling the whole vest moves her toward her limit. If she holds 3%, she might reasonably keep some.

Template: your RSU sell plan

Copy this into a note or spreadsheet and fill it in once a year, then before each vest.

RSU SELL PLAN: [year]

1. My concentration limit
   Max company stock as % of investable assets: ____%
   Current company stock value: $____
   Investable assets: $____
   Current percentage: ____%

2. My sell rule (choose one)
   [ ] Sell 100% at each vest
   [ ] Sell enough at each vest to stay under my limit
   [ ] Sell ____% at vest, hold the rest until [date or condition]

3. Tax cash plan
   Vest income this year (estimated): $____
   Withholding rate on vests: ____%
   My estimated marginal rate: ____%
   Expected shortfall: $____
   Where the money comes from: [sale proceeds / extra paycheck withholding / estimated tax payment]
   Estimated tax payment dates: ____

4. Where proceeds go
   [ ] Emergency fund (target: ____ months)
   [ ] High-interest debt
   [ ] Retirement accounts (max out: ____)
   [ ] Diversified fund(s): ____
   [ ] Near-term goal (home, tuition): $____

5. Restrictions
   Blackout windows: ____
   Pre-clearance required: yes / no
   Trading plan (10b5-1) in place: yes / no

6. Review dates
   Next vest: ____
   Review this plan again: ____

Fill it out before the vest. Once the price moves, your rule should already exist so you aren't deciding based on regret or excitement.

What if you are an insider, an executive, or at a private company?

Insiders and executives. If you have access to material nonpublic information, or you are a designated insider or officer, you may be limited to trading in open windows and may need pre-clearance. A 10b5-1 plan lets you set up sales in advance under rules your legal team will explain. Talk to your company's legal or compliance team before selling. Executives who file ownership reports also have disclosure requirements and sometimes holding guidelines.

Private-company RSUs. Many private companies use double-trigger RSUs: you must meet a time requirement and a liquidity event (like an IPO or acquisition) before the shares vest and are taxed. That can create a large tax bill with no way to sell the shares yet. Read your grant agreement carefully and talk to a tax professional before the trigger event.

Leaving the company. Unvested RSUs usually forfeit when you leave. Check your grant agreement for acceleration or retirement provisions. This affects timing decisions, because a departure can cost you shares you counted on.

Giving to charity. If you donate shares you have held longer than a year, you may be able to deduct their market value and avoid tax on the gain. A donor-advised fund is a common vehicle. Ask a tax professional whether this fits your situation.

Can you build your own RSU tracker?

A spreadsheet works for most people. But if you want vest dates, tax estimates, concentration percentage, and the sell plan in one place that updates as you enter new vests, you can build it as a small app. Remy builds full-stack apps from a plain-English description, so you could describe a private RSU tracker with a vest schedule, a withholding-gap calculator, and a concentration meter, and have it deployed with sign-in. Remy has a 30-day free trial, then a flat monthly platform fee, with AI usage billed at cost. For one person's few grants, a spreadsheet is cheaper. For a household or a small group tracking several grants, an app can be worth it.