so I have 600 shares vesting soon, and I plan on selling immediately. let’s assume the stock price maintains around 42 a share, how much tax am I paying for those 600 shares? i came in at 43.40 for the grant. someone help me understand this.
Your employer will withhold shares to cover your tax - you’ll prob end up with around 460 shares. Then when you sell you’ll pay taxes on whatever gain you make
Income tax. It should be added to your W2.
How is the capital gain calculated? Is it any share price above my initial grant price Is considered a gain?
Capital gain tax only applies between the time it actually vests and the time you sell. If you sell immediately when you vest it should be close to $0. EDIT: Also capital gains is only for long term holding. Short term (< 1 yr) is still taxed as ordinary income.
For RSUs, grant price is zero. Like others have said, your brokerage firm is typically instruct by your employer to withhold some to pay tax. Let’s forget about that for a moment to simplify this. The day your 600 vest, let’s say stock is at $1 IRS sees it as “Uber gave you $600 as income”. The fact that your $600 exist as Uber stock and not as us dollars cash is irrelevant to them until you sell those 600 shares. When you sell them they will be taxed as capital gains, long or short term dependeing on when they were bought (that's the day of vest) and when they were sold.
You might get something between 300-350 shares after tax
If you sell day 1 when vest you won’t really owe short/long gains
Also remember that the withholding rate for tax by your broker, as instructed by your company could be less than your income tax bracket. i.e broker will sell some stocks once they vest to cover tax. Generally it's 22%. But your tax bracket may be 32%. So you might owe a chunk next year. It's better to adjust that rate to be higher so that you're not hit next year. You might also need to pay estimated taxes, which if not paid might result in penalties. Make sure you consult with you tax advisor.
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Rsu is taxed as ordinary income at time of vest. Plus it'll count as short term capital gains if you sell immediately.
I am hitting my 1 year at time of vest. So that is long term gain?
No