Saturday, February 04, 2017

how long to hold RSUs and SPP

Hold SPP shares for at least two years after offer date and one year after purchase date to avoid a disqualifying disposition. 

Hold RSU shares for at least one year.

Phrasing above is fast/lose heuristic, not precise. here are more details for the SPP component.


Summary from link above (TODO: more details on the RSU section):

How much of the stock sale price is compensation and how much is capital gain?

That depends on whether your stock sale is a qualifying disposition or a disqualifying disposition.

Disqualifying disposition:

You sold the stock within two years after the offering date or one year or less from the exercise (purchase date).

  • In this case, your employer will report the bargain element as compensation on your Form W-2, so you will have to pay taxes on that amount as ordinary income.
  • The bargain element is the difference between the exercise price and the market price on the exercise date.
  • Any additional profit is considered capital gain (short-term or long-term depending on how long you held the shares) and should be reported on Schedule D.

Qualifying disposition:

You sold the stock at least two years after the offering (grant date) and at least one year after the exercise (purchase date).

  • If so, a portion of the profit (the “bargain element”) is considered compensation income (taxed at regular rates) on your Form 1040.
  • Any additional profit is considered long-term capital gain (which is be taxed at lower rates than compensation income) and should be reported on Schedule D, Capital Gains and Losses.

1 comment:

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