Before Your Next Vest Date

I’m Mateo Dellovo, a fiduciary adviser for people paid in company stock. When your shares vest on a schedule, with no IPO, deal or exit in sight, nothing forces a decision. That is the risk. Each vest is pay, taxed that day, and each one you keep adds to a position in one company that the vesting schedule sized, not a decision. This page covers the money side, from what a vest is to the rules on selling, and the questions to answer before the next date.

Your RSUs stop being a promise and become pay when the shares are delivered, usually the day they vest. The value of the shares that day, minus anything you paid for them, is wages, reported on your W-2 like a bonus. Social Security and Medicare tax come out of it, and federal income tax is withheld on it, along with state tax where your state has one. Your basis in the shares is their value that day, and your holding period starts the day after.

Your company collects the withholding in one of three ways, and your plan says which, or whether you can choose. A broker sells enough shares to cover it. The company holds back shares and delivers the rest. Or you pay the cash.

Until the shares are delivered, an RSU is an unfunded promise, not property. So there is no section 83(b) election to make on an RSU grant, and any dividend equivalents paid on unvested units are pay, not dividend income.

Social Security tax stops at the year’s wage base, Medicare tax doesn’t, and an extra 0.9% Medicare tax applies above $200,000 of wages for a single filer and $250,000 on a joint return. Your company withholds that extra tax only on your wages above $200,000, whatever your filing status, so a two income household can owe more at filing than was withheld, or less.

At a private company a vest is still pay, with no public market to sell shares into for the tax. Some private company plans allow a section 83(i) election that defers the income tax for up to five years. It is due within 30 days of the vest, or of the shares becoming transferable if that comes first, the deferral ends early if the stock becomes readily tradable, and Social Security and Medicare tax still come out at vest. Ask your equity team whether your plan allows it.

Your company can withhold federal income tax on a vest at a flat 22%. It must withhold 37% on the part of your supplemental pay that passes $1 million in a calendar year from one employer, and a bonus paid earlier in the year counts toward that million. Below that line, 22% is the rate many people get, and once a vest lands on top of a salary the income is often taxed at a higher rate.

For 2026 the 24% bracket begins at $105,700 of taxable income for a single filer and $211,400 on a joint return. The 32% bracket begins at $201,775 and $403,550, the 35% bracket at $256,225 and $512,450, and the 37% bracket at $640,600 and $768,700. On $300,000 of vest income that lands in the 35% bracket for a single filer, 22% withholding leaves $39,000 of federal income tax unpaid, before state tax.

The gap doesn’t announce itself. The W-2 looks complete, the shares are in the account, and the bill shows up when the return is prepared, with interest if the IRS expected the money sooner. The RSU tax gap estimate on this site puts a number on it.

Two ways to close it. Have more withheld from your pay, by putting an extra amount per pay period in Step 4(c) of a new Form W-4. Or pay estimated tax. They aren’t equal. Withholding is treated as paid evenly through the year unless you show the IRS when it was actually withheld, so extra withholding in November can cure a shortfall from a March vest. An estimated payment counts on the day you pay it, so a January payment stops the clock on an April installment that came up short, but doesn’t erase what already ran.

The IRS expects estimated payments when you’ll owe at least $1,000 after withholding and your withholding covers less than the smaller of 90% of this year’s tax or 100% of last year’s, 110% if last year’s adjusted gross income was over $150,000, or $75,000 if married filing separately. The installments fall in April, June, September and the following January. A vest late in the year can leave the earlier installments short on paper, unless you use the annualized method on Form 2210, which counts income in the period it landed in.

The penalty is interest at the IRS underpayment rate for each day an installment stays unpaid, and it applies even when you’re due a refund at filing. The rate resets each quarter, at the federal short term rate plus three points.

Selling the shares the day they vest costs little or nothing in extra tax. Your basis is the vest day value, so there is almost no gain or loss to report, and the income tax on the vest is the same whether you sell or keep the shares. That one fact is where this decision starts.

Every vest you keep is a purchase. The money is yours the day the shares are delivered, and holding them is choosing to buy that much of your company’s stock at that day’s price, with money you could have in cash. So ask the question I ask. If this vest had landed in your account as cash this morning, would you buy your company’s stock with all of it, right now, at today’s price? If the answer is no, you’ve learned something.

At 21 I held almost everything I had in one stock, CMGI, and I never once called it a decision. Every morning I did nothing, I bought it again. I wrote a letter on it, You bought it again this morning.

The SEC puts it plainly. It is risky to have your retirement security depend in whole or in large part upon the fate of any one company. FINRA calls the risk of holding a large portion of your assets in one stock concentration risk, and points out that vesting is contingent on remaining with the company. Your paycheck, your unvested grants and your portfolio can all ride on one name. Decide how much of your net worth you want there, counting the grants that haven’t vested yet, and let each vest date be the day you act on it.

Shares you keep carry the vest day basis. Sell later and the gain or loss is the price minus that basis. More than a year after the vest it is long term, taxed at 0%, 15% or 20% for 2026 depending on your taxable income. A year or less and it is short term, taxed like pay. A 3.8% net investment income tax applies to investment income, this gain included, to the extent your modified adjusted gross income is above $200,000 if you file single, or $250,000 if you file jointly, and those thresholds aren’t indexed.

Two more rules. If you sell shares at a loss within 30 days before or after a new vest, the wash sale rule can disallow the loss, which is then added to the basis of the new shares. Many practitioners treat a vest as an acquisition for this rule, so keep any sale at a loss clear of the 30 days around a vest.

For awards granted after 2013, the basis your broker reports on Form 1099-B leaves out the compensation income, because the rules don’t let brokers add it, and for shares the broker treats as noncovered it may show no basis at all. You correct the basis on Form 8949, or you pay tax on the vest twice.

If you give long term shares to charity instead of selling them, the deduction is generally their fair market value, limited to 30% of your adjusted gross income for gifts to public charities, with the excess carried forward. Starting in 2026, an itemizer deducts only the charitable gifts above 0.5% of adjusted gross income, and for income in the 37% bracket an itemized deduction is worth 35 cents on the dollar, not 37.

Your company’s trading window is policy, not the law. The law turns on whether you’re aware of material nonpublic information when you trade, and it applies whether the window is open or closed. Public companies have to disclose whether they have an insider trading policy and file it as an exhibit to the annual report, so you can read yours. Read your plan documents with it.

A Rule 10b5-1 plan lets you set sales in advance, by date, number or price. Your company’s policy decides whether you can use one and whether its trades run inside a blackout. It protects you only if you adopt it when you have no material nonpublic information and act in good faith with respect to it. If you aren’t a director or officer (board members and the officers who report their trades to the SEC), the first trade can happen 30 days after you adopt the plan. Directors and officers wait the later of 90 days or two business days after the quarterly or annual report for the quarter of adoption, up to 120 days, and certify that they aren’t aware of material nonpublic information. Overlapping plans are limited, and only one single trade plan is allowed in any twelve months. Sell to cover arrangements that pay only the tax on a vest are exempt from both limits.

If you’re an officer, director or a holder of more than 10% of a class of the company’s stock, each sale goes on a Form 4 within two business days. As an affiliate, Rule 144 caps your sales in any three months at the greater of 1% of the shares outstanding or the average weekly trading volume over the four weeks before you file the notice, and a Form 144 is required when a sale passes 5,000 shares or $50,000 in a three month period.

If you hold options, nothing is taxed until you exercise, and the clock that matters is the expiration date in your award agreement. Many plans use a ten year term, and an incentive stock option can’t run longer than that by law. A nonqualified option taxes the spread at exercise, the value that day minus the price you pay, as pay, withheld like a bonus. Your basis is the exercise price plus that income, and the holding period starts the day after the exercise.

An incentive stock option adds no regular income at exercise. The spread is an adjustment for the alternative minimum tax, and your AMT basis in the shares rises by the same amount. For 2026 the AMT exemption is $90,100 for a single filer and $140,200 on a joint return, and it phases out at 50 cents per dollar of alternative minimum taxable income above $500,000 and $1,000,000. Run the AMT math before the exercise, not after.

Keep the shares more than two years from the grant and more than one year from the exercise and the whole gain is capital gain. Sell sooner and the spread at exercise, capped at your actual gain, is pay. Only $100,000 of options, valued at grant, can first become exercisable as incentive options in any calendar year. The rest are nonqualified.

An employee stock purchase plan under section 423 can sell you shares for as little as 85% of the stock’s value at the start of the offering or at the purchase date, whichever is lower when the plan uses both. You can’t accrue the right to buy more than $25,000 of stock a year, measured at the offering date price, and owners of 5% or more can’t take part. The discount is pay, but when it’s taxed depends on when you sell. Hold the shares more than two years from the offering date and more than one year from the purchase, and the pay is the lesser of your actual gain or the discount at the offering date, with the rest capital gain. Sell sooner and the spread at purchase is pay.

Unvested awards are usually forfeited when your employment ends. The plan document and award agreement decide the details, including any exceptions for retirement, death, disability or a change in control, so read them before you give notice.

Vested options have a window to exercise after you leave, often three months, and they expire if you miss it. An incentive stock option keeps its status only if you exercise within three months after your employment ends, with a one year window after a disability and no tax deadline after a death.

A job change does nothing to vests already delivered. The income was fixed in the year they vested, and the shares keep their basis and holding period.

1. When is your next vest date, and how many shares vest this year?
2. How does your company collect the withholding, and at what federal rate?
3. Which federal and state brackets does this year’s vest income land in, and what does 22% withholding leave unpaid?
4. Do you close the gap with a new Form W-4 or an estimated payment, and by which date?
5. If the last vest had landed as cash, would you have bought this much of your company’s stock with it at that day’s price?
6. How much of your net worth rides on your employer once you count salary, unvested grants and the shares you hold?
7. What does your company’s insider trading policy say about blackout dates and 10b5-1 plans, and are you an officer, director or 10% holder?
8. For each lot you hold, what is the basis, what is the vest date, and which lots are long term?
9. If you hold options or ESPP shares, what are the exercise prices, the expiration dates and the holding periods, and what would an exercise add to the alternative minimum tax?
10. If you left this year, which grants would you forfeit, and how long would you have to exercise vested options?
11. What is the money from each vest for in the next few years?