As we approach the final quarter of the year, tech professionals with Restricted Stock Units (RSUs) face a critical window for tax optimization. At Woven Capital, we believe that understanding your RSU tax implications shouldn’t feel overwhelming—it should empower you to make exceptional decisions that align with your values and financial goals.
Why RSU Tax Planning Matters Now
Your RSUs represent more than just equity compensation; they’re a significant component of your wealth-building strategy. However, without proper planning, you could find yourself facing unexpected tax burdens or missing opportunities to optimize your overall financial picture.
The Q4 Advantage: Many tech companies vest RSUs on quarterly schedules, with significant vesting events often occurring in the fourth quarter. This timing creates unique planning opportunities before year-end tax deadlines.
Understanding Your RSU Tax Landscape
When your RSUs vest, they’re treated as ordinary income at fair market value. This means:
- Immediate Tax Impact: Vested RSUs are subject to federal income tax, state income tax (where applicable), Social Security, and Medicare taxes
- Withholding Considerations: Your employer typically withholds 22% for federal taxes, but this may not cover your full tax liability
- Future Capital Gains: Any appreciation after vesting is treated as capital gains when you sell
Strategic Moves for Q4 RSU Planning
1. Evaluate Your Tax Withholding
Action Item: Review your year-to-date tax withholding and upcoming RSU vesting schedule. If you’re in a higher tax bracket, the standard 22% withholding may leave you short at tax time.
Woven Tip: Consider making estimated quarterly tax payments or adjusting W-4 withholding on your base salary to cover any shortfall.
2. Consider Charitable Giving with Appreciated Stock
If you have RSUs that have appreciated since vesting, donating them to charity can provide dual benefits:
- Avoid capital gains tax on the appreciation
- Receive a tax deduction for the full fair market value
This strategy aligns perfectly with socially responsible investing principles, allowing your wealth to support causes you care about while optimizing your tax situation.
3. Harvest Tax Losses
Review your investment portfolio for positions that have declined in value. Selling these investments can generate tax losses to offset gains from RSU sales, reducing your overall tax burden.
4. Maximize Retirement Contributions
Use RSU proceeds to maximize contributions to tax-advantaged accounts:
- 401(k) Contributions: Up to $23,500 for 2025 (plus $7,500 catch-up if 50+)
- Roth IRA Conversions: Consider converting traditional IRA funds to Roth during lower-income years
- Mega Backdoor Roth: If your company plan allows, contribute after-tax dollars to your 401(k) and convert to Roth
5. Plan Your Selling Strategy
Not all RSU sales need to happen immediately upon vesting. Consider:
- Staggered Sales: Spread sales across tax years to manage tax brackets
- Long-term Capital Gains: Hold vested shares for over one year when possible
- Tax-Loss Harvesting Coordination: Time sales to optimize with other portfolio moves
Beyond the Numbers: Aligning with Your Values
At Woven Capital, your financial strategy should reflect what matters to you. Consider how your RSU planning can support your broader goals:
- Impact Investing: Reinvest RSU proceeds into ESG-focused investments
- Emergency Fund Building: Use proceeds to strengthen your financial foundation
- Education Funding: Contribute to 529 plans for children’s education
- Homeownership: Build down payment funds for your first home or investment property
Your Q4 Action Plan
Before November 1:
- Calculate the projected tax liability from the remaining 2025 vesting
- Review and adjust tax withholding or make estimated payments
- Identify tax-loss harvesting opportunities
Before December 1:
- Finalize charitable giving strategy using appreciated stock
- Maximize retirement account contributions
- Plan Q4 selling schedule for existing holdings
Before December 31:
- Execute planned stock sales and charitable donations
- Make final retirement contributions
- Ensure adequate tax withholding or estimated payments
The Woven Difference
Your RSU tax planning shouldn’t exist in isolation—it should be woven into your comprehensive financial strategy. We help tech professionals like you navigate these complexities while ensuring your money decisions align with your values and long-term goals.
Remember, tax laws are complex and subject to frequent changes. While these strategies provide a solid foundation, working with a financial advisor who understands the unique challenges facing tech professionals can help you optimize your specific situation.
Ready to take control of your RSU tax strategy? Let’s create a plan tailored to your unique circumstances, helping you spend more time doing what you love and less time worrying about tax season.