Executive Summary
What is Tax-Loss Harvesting with RSUs and Stock Options?
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Tax-Loss Harvesting with RSUs and Stock Options
Tax-loss harvesting involves selling securities at a loss to offset capital gains from other investments, including those realized from selling vested RSUs (Restricted Stock Units) or exercised stock options, with net losses up to $3,000 deductible against ordinary income annually and excess carried forward indefinitely.[3][4][5] This strategy applies primarily to post-vesting sales of RSU shares or post-exercise sales of option shares generating capital gains/losses, not the initial vesting or exercise events taxed as ordinary income; the IRS wash sale rule (IRC § 1091) disallows losses if substantially identical securities are repurchased within 30 days before or after the sale.[3]
Taxation of RSUs
RSUs are taxed as ordinary income at vesting based on the number of shares vesting multiplied by the fair market value (FMV) per share on the vesting date, reported on Form W-2 and subject to federal (10%-37% brackets for 2026), state, FICA (6.2% up to wage base), and Medicare (1.45% unlimited, plus 0.9% additional for high earners) taxes.[1][2] No §83(b) election is available for RSUs, unlike restricted stock awards (RSAs), as RSUs represent a promise to deliver shares, not current property (Treas. Reg. §1.83-3(a)(10); IRC §83).[2]
- Example: 100 RSUs vest on January 1, 2026, at $100/share FMV = $10,000 ordinary income taxed at marginal rate (e.g., 37% = $3,700 federal tax).[1]
- Source: Publication 525 (2025), Taxable and Nontaxable Income (covers compensation including RSUs under IRC §83); Treas. Reg. §1.83-3 (Property transferred in connection with performance of services); 26 U.S. Code §83 (Property transferred in connection with performance of services).
If shares are held post-vesting and sold later at a loss, that capital loss ca
Footnotes
Primary Sources
| Source | Type | URL |
|---|---|---|
| Publication 525 (2025), Taxable and Nontaxable Income | Reference | https://www.irs.gov/publications/p525 |
| Treas. Reg. §1.83-3 (Property transferred in connection with performance of services) | Reference | https://www.law.cornell.edu/cfr/text/26/1.83-3 |
| 26 U.S. Code §83 (Property transferred in connection with performance of services) | Reference | https://www.law.cornell.edu/uscode/text/26/83 |
| Publication 525 (2025) | Reference | https://www.irs.gov/publications/p525 |
| Form W-2 Instructions (2025) | Reference | https://www.irs.gov/pub/irs-pdf/iw2w3.pdf |
Disclaimer: This guide discusses legal tax optimization strategies only. Tax evasion is illegal and is never recommended. This content is for educational purposes and does not constitute tax, legal, or financial advice. Tax laws vary by jurisdiction and change frequently. Always consult a qualified tax professional (CPA, tax attorney, enrolled agent) before making decisions based on this information. The authors accept no liability for actions taken based on this content.