Hacker News Reader

Comment by vmarsy | Hacker News Reader

big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units). Those are easier to understand, there's no exercising decision to be made, you just need to know your vesting dates. The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stocks.

View on HN

> The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stocks.

The decision is more along the lines of sell now vs. sell later. The LTCG decision is not nearly as important. The conventional wisdom is just to treat the RSU as the same as salary by selling immediately upon vesting. Since you're already employed and paid by them, holding equity in the company you work for is unnecessary additional risk.

When the RSUs vest you usually have the option to take all and pay the appropriate tax when tax season comes around OR take a reduced amount to cover the taxes. Do you recommend/have a preference? What are the pros and cons?

I'm at a company that automatically sells enough RSUs at vest date to cover withholding (the remainder is deposited alongside the regular salary). So that decision is made for me. No matter which option I'd take, I'd use the one that allows me to move as much money into retirement accounts, 401(k) etc. as quickly as possible.

If you're working in the Bay Area and making average wage for a software developer, your marginal tax rate is going to be 28%+. If waiting 12 months means you can lower your tax burden to the long term capital gains rate of 15%, that's a no brainer.

AIUI, RSUs are treated as normal W-2 income when they vest.

Right. Your cost basis is the price at vesting, so it's the same as if you bought the stock at market with cash for the same price.

so is the capital gains tax only on the profit from the stock? wouldnt it be better just to sell instantly and not have so much of your money tied up into one asset anyway? Sorry if these are basic questions

Yep and yep. Not basic at all, this stuff is only simple once you already know how it works.

big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units).

Microsoft used stock options when I worked there, hence my use of it as an example.

MSFT was one of the big model companies for stock options and sharing the wealth around. I think they got rid of their stock option plan sometime under Blamer when the stock started paying a dividend.

That's correct. It was shortly after Steve took over as CEO. At the time a lot of options were underwater and Microsoft offered a buy-back plan where one could get a lump-sum payment in place of those options. In retrospect taking the buyback was the right decision as the Microsoft options had a 10 year expiry and most of the underwater options didn't climb back within their 10 year window.

Reply on news.ycombinator.com