Avoid Wash Sales With RSU Vesting

Strategy Overview

If you work at a publicly traded company and have RSUs, then you need to be cognizant of IRS wash sale rule. When you sell company stock at a loss, the IRS requires that you wait at least 30 days before repurchase/acquiring the same shares. The vesting of your RSUs counts as an acquisition of shares, so you need to take that into account if you're selling shares at a loss.

Tax Details

The Wash Sale Rule: This rule states that you cannot deduct a loss on the sale of stock on your tax return if, within 30 days before or after the sale (a 61-day window), you buy or acquire substantially identical stock or related derivatives. This includes across across account types (e.g. you cannot sell in your taxable account and buy in your IRA).

RSU Vesting IS an Acquisition. When your RSUs vest, you acquire ownership of the shares. Even though you may not have "bought" them, the IRS does consider it an acquisition for the purposes of the wash sale rule

Key Benefits

• Ensure the losses you recognized are taxed as you intended. If you sold company stock at a loss, you likely had a related tax strategy for those losses. To ensure your strategy works as you intended, make sure to take into account vesting RSUs and the impact they could have on your recognized capital losses.

Key Considerations/Flags

• The 61-Day Window is rigid. RSU vesting just one day inside this window (30 days before or 30 days after your sale at a loss) can trigger the rule for the shares involved.

• Vesting Date is Key. The date your RSUs vest is the acquisition date for wash sale purposes, not the grant date.

• Partial Application. If you sell 1,000 shares at a loss but only 500 RSUs vest within the window, the wash sale rule only applies to the loss associated with 500 shares. The loss on the other 500 shares may still be deductible (assuming no other repurchases).

• "Sell-to-Cover" is Not the Triggering Acquisition. Often, some RSU shares are automatically sold upon vesting to cover income taxes. This sale happens after you've acquired the shares through vesting. The vesting itself is the acquisition that can trigger a wash sale if you had a prior loss.

• Multiple RSU Lots. If you have several RSU grants vesting frequently (e.g., quarterly or monthly), the potential for overlap with any stock sales at a loss increases.

Strategy: When to Consider This and When to Avoid It

​🟢When to Consider This Strategy:

• If you have sold shares at a loss and recognized a capital loss. If you have a loss, make sure you understand if the wash rule from vesting RSUs will negate some (or all) of the loss.

​🔴When to Not Use This Strategy:

• If you have not sold shares, or you sold shares at a gain. The wash sale applies to sales that generate a capital loss. If you did not sell any shares, or sold shares for a gain, then

Example

Transaction 1: Sale at a Loss. On March 1, 2025, Sarah sells 200 shares of publicly traded Company X stock for $40 per share. Her original cost basis for these shares was $50 per share. She realized a loss of $10 per share ($40 sale price - $50 purchase price), and a total loss of -$2000 (200 shares * -$10/share)

Transaction 2: RSU Vesting (Acquisition). On March 20, 2025 (within 30 days of the sale at a loss), 100 RSUs of Company X stock vest for Sarah at $42 per share.

Wash Sale Rule Application. Sarah acquired 100 identical shares (through RSU vesting) within 30 days of selling 200 shares at a loss. As such, the wash sale rule applies to 100 of the shares sold on March 1st.

• Disallowed Loss: The loss on 100 shares is disallowed: 100 shares * $10/share loss = $1,000.

• Allowable Loss: Sarah can still claim a loss on the other 100 shares sold on March 1st (assuming no other acquisitions): 100 shares * $10/share loss = -$1,000.

• Cost Basis Adjustment for Vested RSUs: The $1,000 disallowed loss is added to the cost basis of the 100 vested RSUs.

  • Initial basis of vested RSUs: 100 shares * $42/share (FMV at vest) = $4,200.

  • Adjusted basis of vested RSUs: $4,200 + $1,000 (disallowed loss) = $5,200.

  • New basis per vested RSU share: $5,200 / 100 shares = $52 per share. When Sarah eventually sells these 100 RSU shares, her capital gain or loss will be calculated using this adjusted basis of $52 per share.