I've been lazy and sitting on RSUs for too long and now I want to efficiently swap them for index funds + principal on mortgage. What is the most efficient way of doing this? I've accumulated them over three years or so as stock has risen, and they're taxed at vesting. One other wrinkle is my partner plans to quit working next year, which means income will be lower next year.
So in my mind that means:
2015: 10 vested @ $80  suppose 2 sold for tax purposes, I have 8
2016: 10 vested @ $90  suppose 2 sold for tax purposes, I have 8
2017: 10 vested @ $100  same again, 8
Selling the 8 this year should effectively do nothing to my income because capital gains should be negligible and I've already paid taxes, right? On the other hand, selling the 8 from 2016 I would potentially pay marginal rate for capital gains between 2016 and now. Then for 2015 I would pay 15% for capital gains between 2015 and now?
Thinking of reducing risk in short term and being tax efficient that makes me think I should sell 8 from 2015 and 2017 this year, and then the 8 from 2016 next year when they've aged out to longterm and I have lower income to report?
I'm looking for some confirmation on my understanding and any thoughts on ways to do this better. I'm not sure if there are tools to help with this  my brokerage is Morgan Stanley if that helps.
Thanks
Most efficient method to swap RSU for Index
Re: Most efficient method to swap RSU for Index
Welcome to the forum.
At this point it doesn't matter that they use to be RSUs. You hold stock with the basis you listed. The decision also depends on your marginal tax rate. It is not clear through your use of "partner" if you file a joint return or not. Is what you listed real or representative in some way? Without real numbers, it is hard to say what to do.
Your understanding of taxes seems to be correct.
Yes, you did pay taxes when the shares vested by having shares withheld. All that should show up on the W2.
If the 2017 shares have not moved much off of $100, then dispose of them.
More info is needed to say what to do with 2015 and 2016.
At this point it doesn't matter that they use to be RSUs. You hold stock with the basis you listed. The decision also depends on your marginal tax rate. It is not clear through your use of "partner" if you file a joint return or not. Is what you listed real or representative in some way? Without real numbers, it is hard to say what to do.
Your understanding of taxes seems to be correct.
Yes, you did pay taxes when the shares vested by having shares withheld. All that should show up on the W2.
If the 2017 shares have not moved much off of $100, then dispose of them.
More info is needed to say what to do with 2015 and 2016.
Re: Most efficient method to swap RSU for Index
Your understanding of the mathematics is, in general, correct. The question you need to ask yourself is which is a greater risk: the certainty of paying more taxes now on your 2016 lot or the chance that your 2016 lot will lose more value than the difference between your marginal tax rate and the capital gains tax rate._milkjug_ wrote: ↑Thu Oct 26, 2017 11:15 am I've been lazy and sitting on RSUs for too long and now I want to efficiently swap them for index funds + principal on mortgage. What is the most efficient way of doing this? I've accumulated them over three years or so as stock has risen, and they're taxed at vesting. One other wrinkle is my partner plans to quit working next year, which means income will be lower next year.
So in my mind that means:
2015: 10 vested @ $80  suppose 2 sold for tax purposes, I have 8
2016: 10 vested @ $90  suppose 2 sold for tax purposes, I have 8
2017: 10 vested @ $100  same again, 8
Selling the 8 this year should effectively do nothing to my income because capital gains should be negligible and I've already paid taxes, right? On the other hand, selling the 8 from 2016 I would potentially pay marginal rate for capital gains between 2016 and now. Then for 2015 I would pay 15% for capital gains between 2015 and now?
Thinking of reducing risk in short term and being tax efficient that makes me think I should sell 8 from 2015 and 2017 this year, and then the 8 from 2016 next year when they've aged out to longterm and I have lower income to report?
I'm looking for some confirmation on my understanding and any thoughts on ways to do this better. I'm not sure if there are tools to help with this  my brokerage is Morgan Stanley if that helps.
Thanks
Using the numbers in your example, you currently have $80 of capital gains on your 2016 lot (8 shares appreciating $10). Assuming you pay 15% CG and have a 25% marginal tax rate (adjust for your situation accordingly), you owe either $12 or $20 of tax depending on the year  it's an $8. To lose $8 on your holding, the stock needs to drop $1 per share, or 1%. This might happen today.
If you want to sell ultimately as a strategy, just sell now. With such small capital gains, you probably have a pretty equal chance of losing the difference you gain in tax savings by selling later to the difference in sales price later based on the volatility of the stock.

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Re: Most efficient method to swap RSU for Index
Without a LOT more info, there is no way to know if spreading out the sale will actually change your marginal tax rate, and thus your capital gains tax rate.
These sound like they are worth about $3000, with ~$300 in capital gains? If that is the case, I can't imagine it making much difference unless you expect to drop down a bracket next year, and with that, I'd just pay the tax and diversify.
Also not sure what your logic is in selling 2 from 2015 and 2 from 2016. You should sell as many as you can without bumping up a bracket (as they relate to longterm capital gains), so that would likely mean more of the 2016 ones, assuming constant growth, and then remaining older ones after your bracket reduction next year.
These sound like they are worth about $3000, with ~$300 in capital gains? If that is the case, I can't imagine it making much difference unless you expect to drop down a bracket next year, and with that, I'd just pay the tax and diversify.
Also not sure what your logic is in selling 2 from 2015 and 2 from 2016. You should sell as many as you can without bumping up a bracket (as they relate to longterm capital gains), so that would likely mean more of the 2016 ones, assuming constant growth, and then remaining older ones after your bracket reduction next year.
Re: Most efficient method to swap RSU for Index
The numbers are just for having something concrete to discuss, $300 wouldn't be worth thinking this hard about.
Thanks CppCoder  the information in your second paragraph was particularly helpful. It sounds like I need to calculate the total tax paid on capital gains in various scenarios vs. the percentage the stock would need to change + long term capital gains stack on that change to decide the best strategy.
Thanks CppCoder  the information in your second paragraph was particularly helpful. It sounds like I need to calculate the total tax paid on capital gains in various scenarios vs. the percentage the stock would need to change + long term capital gains stack on that change to decide the best strategy.