Newbie question… Let’s say i have 100 stocks vested in 4yrs. And say 25 shares were vested each year at $10, $20, $50 and $60, and now the stock price is $100. If i want to sell all 100 stocks now, should I be prepared to pay lot of taxes? When would be the right time to sell them? Tc:🥜 Yoe: 2 #stocks #investments
First: you won't have 100 stocks. The right time to sell is when you need the money. Tax: most recent stocks from the last year vesting will be taxed as short term capital gains, and others as long term.
Given you are 2 year experienced your tax slab should not shift a lot. Look at your taxable income for the year and see what would it be. If you sell after 1 year from vest.. it will be long term capital gains tax. Otherwise it will be billed into regular income. Might or might not matter based on your situation. If it doesn't matter sell the new ones since they vested at a higher rate you would have already paid most tax for those.
Your employer will likely have held onto some shares to cover tax, so instead of getting 100 shares, you may have only received 75 shares. This is no different from employers withholding part of your salary for tax purposes. Assuming that’s the case, you’d be paying capital gains taxes on these shares. For shares vesting at $10 and selling at $100, that’s a net gain of $90 a share. So you would have to pay capital gains on that $90/share. The vesting dollar seems strange though. Normally, you have a preset number of shares that then vest within four years. That number of shares was calculated based on when you received the grant. So likely all of the shares would have the same strike price, not the “$10, $20, $50 and $60” scenario you outlined.
How to calculate taxes: 1+ year since you received the stocks (they were vested into your account) --> LT cap gains. Find the rate and multiply that by the sales price - purchase (vest) price <1 year since you received the stocks --> ST cap gains, aka taxed at your income level. Same calculation, different percentage
As long as you wait a year from each vest, the gains will be counted toward long-term capital gains. If you sell before a year from vest for each vest, it will be based on your income tax