Deciding when to sell RSUs comes down to three overlapping calendars: the tax calendar that separates short-term from long-term capital gains, your company’s trading window calendar, and your own vesting schedule, which can quietly disallow losses if you sell at the wrong moment. The financial default should lean toward selling sooner rather than later to control concentration risk, with timing adjusted around those three constraints.
The One-Year Clock Is the Core Timing Decision
Your holding period starts the day after your shares vest. Sell within one year and any gain above your cost basis is short-term, taxed at ordinary income rates that run from 10% to 37%. Hold for more than one year and the gain qualifies for long-term capital gains treatment.1Internal Revenue Service. Fact Sheet FS-2007-19 – Reporting Capital Gains
Long-term rates are meaningfully lower. For 2025, a single filer pays 0% on long-term gains if taxable income stays below $48,350, 15% up to $533,400, and 20% above that.2Internal Revenue Service. Topic No 409, Capital Gains and Losses High earners also owe a 3.8% Net Investment Income Tax on capital gains once modified adjusted gross income crosses $200,000 single or $250,000 married filing jointly.3Internal Revenue Service. Net Investment Income Tax
The gap between a 37% ordinary rate and a 20% long-term rate, even after adding the 3.8% NIIT, is real money on a large position. But holding a full year to capture that lower rate means bearing a full year of single-stock risk. A 30% drop while you wait wipes out the tax savings many times over. There is no universal answer here. The size of the position relative to your total wealth and your read on the next twelve months at the company drive the call.
One practical point: shares vest in tranches, so each tranche has its own one-year clock. If you plan to sell a specific vest for long-term treatment, mark its one-year anniversary and check whether a trading window is open in the weeks that follow.
Concentration Risk Is the Main Reason to Sell
Your paycheck, health insurance, career trajectory, and equity are all tied to one company. If that company stumbles, everything takes a hit at once. That is the textbook definition of concentrated risk, and it is the strongest argument for selling as shares vest rather than letting them stack up.
A common rule of thumb is that no single stock should represent more than 10% to 15% of your total investment portfolio. When RSU vesting pushes you past that threshold, selling enough to rebalance is portfolio hygiene rather than a bet against your employer. The proceeds can go into broad index funds or bonds that do not move with your paycheck.
The emotional default is to hold. You work at the company and selling can feel disloyal. Recognize that pull for what it is and separate the compensation decision from the investment decision. Money that has already vested is yours to allocate wherever the risk-adjusted return is best.
Trading Windows and Insider Trading Rules Limit When You Can Actually Sell
Even when the tax math favors selling, company policy may block you. Most public companies enforce blackout periods that prohibit employees from trading in the weeks before and after quarterly earnings releases. Violating a blackout is a fireable offense at most companies and can expose you to insider trading liability.
Beyond company blackouts, federal law separately bars you from trading while you hold material nonpublic information, meaning anything a reasonable investor would consider important when deciding to buy or sell, such as unannounced acquisitions, regulatory actions, or major product failures. Civil penalties can reach three times the profit gained or loss avoided.4Office of the Law Revision Counsel. 15 USC 78u-1 – Civil Penalties for Insider Trading Criminal penalties run up to 20 years in prison and a $5 million fine for individuals.5Office of the Law Revision Counsel. 15 USC 78ff – Penalties
Trading windows typically open a day or two after earnings are released and stay open for a few weeks. The exact schedule varies by employer. Combine short windows with the one-year holding preference and the days you can actually sell in a given year shrink fast. Map out every open window at the start of the year and decide in advance which vests you plan to sell.
Rule 10b5-1 Plans
A 10b5-1 plan lets you pre-schedule trades at a time when you do not have inside information, then execute them automatically later, even during periods when you might. The plan creates an affirmative defense against insider trading allegations by removing your discretion at the moment of the sale.
Recent SEC amendments require cooling-off periods before the first trade under a new or modified plan. Directors and officers must wait at least 90 days after adoption, and in some cases up to 120 days, until two business days after the company files quarterly results covering the period when the plan was adopted. Other employees face a 30-day cooling-off period.6SEC. Rule 10b5-1 – Insider Trading Arrangements and Related Disclosure If you know you will want to sell later in the year, adopt the plan early enough to clear the waiting period.
Check the Vesting Calendar Before Selling at a Loss
If you sell company shares at a loss and another RSU tranche vests within 30 days before or after that sale, the IRS treats the new vest as a replacement purchase of substantially identical shares. Under the wash sale rule, the loss is disallowed for that tax year. The disallowed loss gets added to the cost basis of the newly vested shares, so it is not gone permanently, but you cannot use it to offset gains now.
This catches people because RSU vests happen on a schedule you do not control. Before selling at a loss, check every active grant’s vesting calendar and confirm nothing lands inside the 60-day window around your planned sale. The rule also reaches across accounts, including a spouse’s brokerage and IRAs.
Fix Your Cost Basis Before You File
The single most expensive RSU mistake is silent: paying tax twice on the same income because the cost basis on your 1099-B is wrong.
When your shares vested, you already paid ordinary income tax on their full fair market value. That value is your cost basis. When you later sell, your brokerage may report a cost basis of $0 on Form 1099-B. Plug that $0 into your return without adjusting it and you pay capital gains tax on the entire sale price, including the portion you already paid income tax on at vesting.
The fix goes on Form 8949. Enter the basis your brokerage reported in column (e), use Code B in column (g), and enter the correction as a negative number in parentheses in column (g) so the true basis flows through.7Internal Revenue Service. Form 8949 Codes Your brokerage’s supplemental stock plan statement usually lists the correct per-share basis even when the 1099-B does not. Check every RSU sale against your vesting records.
Selling for a Specific Goal
The most psychologically comfortable RSU sales have a clear purpose: a home down payment, paying off high-interest debt, funding a child’s education account. Attaching the sale to a concrete use removes the “what if the stock doubles” regret because you know what the money accomplished. Without a specific use, the diversification argument still holds, but it helps to frame the sale as a deliberate portfolio decision rather than a call on the stock.
Hedging Instead of Selling Large Positions
For employees with very large positions who want downside protection without triggering an immediate taxable event, a few strategies exist. An equity collar combines a purchased put option, which sets a price floor, with a sold call option, which caps upside, often at little or no out-of-pocket cost. Prepaid forward contracts deliver cash now in exchange for shares at a future date, providing liquidity without an immediate sale. Exchange funds pool your single-stock position with others and hand back diversified exposure, again without an immediate taxable event. These tools generally require positions in the high six figures or larger and run through wealth management firms.
If Your Company Is Private, You May Not Be Able to Sell at All
RSUs at private companies almost always have double-trigger vesting. Shares do not settle until both the time-based condition and a liquidity event, usually an IPO or acquisition, are met. Until that second trigger fires, you receive no shares, owe no taxes, and cannot sell. Secondary market transactions like tender offers typically do not count as the liquidity event, so a private secondary sale usually will not satisfy it either. Most agreements also require you to still be employed when the liquidity event occurs, meaning you forfeit the units if you leave first, even if time-based vesting is complete.
Unvested Shares Vanish When You Leave
Unvested RSUs are almost always forfeited when you leave, whether you resign, are laid off, or are fired for cause. Narrow exceptions exist. Death or disability typically triggers acceleration under most plans. A change in control may trigger partial or full acceleration depending on your grant agreement, with some plans accelerating 25% to 100% of unvested units on a qualifying termination inside a window around the acquisition. Read the award agreement before assuming anything applies.
If you are weighing a job offer while sitting on a large unvested position, add up the fair market value of every unvested tranche and treat it as compensation you would be walking away from. Some employers will offer a sign-on bonus or replacement grant to offset the forfeiture, but you have to ask and show the math.
The worst approach is the passive one: shares accumulating in a brokerage account without a plan, no one checking the cost basis on the 1099-B, and the blackout calendar ignored. Vested RSUs are real equity, and real equity needs active management.