Wash sale rule RSUs: What Kestrel Bay Retirement Advisors checks before you sell

How does an RSU vest trigger the wash sale rule?

The IRS looks at whether you acquired substantially identical stock, not whether you chose to buy it. A scheduled RSU vest of your employer's shares counts, as do ESPP purchases, ISO or NSO exercises and dividend reinvestments. The rule can apply even when the new shares arrive through a compensation plan rather than a brokerage order.

The rule runs both ways. A vest 30 days after the loss sale counts, and so does a vest in the 30 days before it if you still hold those new shares after the sale. Say you sell 1,000 shares for a loss while 400 replacement shares land inside the window: the loss on 400 shares is deferred, and the loss on the other 600 stands.

Shares withheld for taxes are a gray area because practitioners differ on whether the gross vest or only the net shares delivered count. Kestrel Bay Retirement Advisors plans to stay outside the window altogether, so that question does not control the sale date. Investing involves risk, including loss of principal.

What a June vest did to a $50,000 loss

Hypothetical: Jonah and Mei are 46 and 44. Jonah is a product director at a chip maker with ISOs and NSOs. Mei left a startup holding early-exercised shares, and they have two children in middle school. Jonah holds 1,000 employer shares from an earlier vest with a $150 basis per share. The market price is $100, so selling all 1,000 on June 1 creates a $50,000 loss: 1,000 × ($150 - $100) = $50,000.

Mei expects a $50,000 long-term gain from selling some startup shares. On June 15, Jonah's quarterly RSU vest delivers 400 shares at $102. Those are replacement shares. The disallowed amount is 400 × $50, or $20,000. The remaining $30,000 loss can offset Mei's gain this year.

The $20,000 is not simply erased. Because the shares sit in a taxable account, it moves into the new shares' basis: $102 vest price + $50 disallowed loss per share = $152 basis per share. For 400 shares, that is 400 × $152 = $60,800. The holding period of the sold shares carries over too.

At an illustrative 20% combined rate, the $20,000 deferred loss represents about $4,000 of tax not saved this year. Before Kestrel Bay Retirement Advisors suggests a loss sale, it puts the vest calendar next to the trade and works out how much of the loss survives this tax year.

Look down the table and only one date survives intact. July 20 is 35 days past the June 15 vest and well ahead of September 15. A sale before a vest gets cut back, and so does a sale shortly after one.

What do people get wrong about company-stock wash sales?

The account and transaction type matter. A broker can report what it sees in its own account, but it cannot automatically know that an employer plan delivered 400 shares at another custodian. Kestrel Bay Retirement Advisors treats the equity portal, brokerage statements and tax return as one record rather than assuming one form contains the whole story.

• Myth: wash sales happen only when you buy shares back. What is true: RSU vests, ESPP purchases, ISO or NSO exercises, dividend reinvestments and a spouse's purchase can create replacement shares.
• Myth: a wash sale wipes out the loss. What is true: in a taxable account, the loss generally moves into the new shares' basis. A replacement purchase in an IRA can disallow the loss without adding it to basis.
• Myth: your 1099-B will flag every wash sale. What is true: brokers generally report wash sales for identical securities in the same account. A vest at a stock-plan administrator may not appear on the 1099-B from your separate brokerage, so you may need Form 8949 code W.
• Myth: a harvested loss offsets RSU or NSO income. What is true: those awards create ordinary wages. Net capital losses offset only $3,000 of ordinary income per year, with the rest carried forward. In Jonah and Mei's case, the loss is useful because it pairs with Mei's capital gain.

How Kestrel Bay Retirement Advisors schedules sales around a vest calendar

A clean gap is a calendar result, not a guess. If the next vest is June 15, a loss sale on July 1 is still inside the 30-day period after the vest. The first day outside that window is July 16, assuming no other acquisition falls nearby.

Use this rule today. Find every RSU vest, ESPP purchase or option exercise of the same stock within 30 days of the day you plan to sell at a loss, counting both earlier and later dates. If one is there, move the sale to a date at least 31 days from each event. Otherwise, plan on the loss for the matching shares landing in the new shares' basis.

• You: export the vest schedule from the equity portal. Add ESPP purchase dates and any planned ISO or NSO exercises.
• Kestrel Bay Retirement Advisors: mark 30 days on each side of every date and identify clean gaps. With vests on March 15, June 15, September 15 and December 15, the summer gap runs July 16 through August 15.
• You: compare that gap with the company's trading window. A product director or other insider may be blocked from trading during part of it.
• You: sell using specific lot identification, generally reviewing highest-basis lots first. Turn off dividend reinvestment and avoid purchases of the stock by you, your spouse or your IRA for 31 days.
• At tax time: compare the brokerage 1099-B with stock-plan statements. Enter any needed code W adjustment on Form 8949. The client receives a one-page note listing the sale date, lots sold and loss expected to count this year.

Is waiting for a clean window worth it?

Waiting has a price. The clean gap may be only about a month per quarter, such as July 16 to August 15 in this calendar. The stock can rise while you wait and shrink the loss, or a blackout can close the gap completely.

We would usually rather wait three weeks for a clean date than sell into a vest, because a deferred loss does not reduce the tax bill you are trying to cut this year. The exception is a position so large that holding it for another month creates the bigger risk. Yes, a wash sale only defers the loss. If you hold the newly vested shares for years, deferred can mean a long time.

• The full loss can count this year against real capital gains. In the example, that is $50,000 instead of $30,000.
• Selling reduces the amount of wealth tied to one employer's stock.
• Nothing requires you to buy the stock back after selling it.

Which mistakes quietly cancel a harvested loss?

The costly mistake is usually timing, not arithmetic. A sale made a couple of weeks before a scheduled vest feels finished until the replacement shares arrive. Kestrel Bay Retirement Advisors checks the next acquisition before discussing the sale, then checks the statements again at tax time.

• Selling two weeks before a quarterly vest can defer a large loss. In the example, the June 1 sale before the June 15 vest deferred $20,000 and left about $4,000 of tax unsaved that year at an illustrative 20% combined rate.
• Buying the stock back in an IRA or Roth IRA within 30 days can make the loss disappear permanently. Under Rev. Rul. 2008-5, the loss is disallowed and is not added to any basis.
• Leaving dividend reinvestment on can create a small partial wash sale that is easy to miss during statement reconciliation.
• Trusting the 1099-B can overstate the loss when the vest sits at a different custodian. The missing adjustment may produce tax due later if the return is corrected.

What should you check before selling company stock at a loss?

Before selling, confirm every acquisition source and the tax purpose of the loss. A 61-day review should include the equity portal, ESPP calendar, option exercise plans, spouse's accounts and automatic reinvestment settings. Kestrel Bay Retirement Advisors also checks whether the chosen lots actually have losses and whether the intended offset is a capital gain.

Sizing an ISO exercise for AMT is a separate question, and we review it separately. Here the issue is timing: an exercise inside the window can match the loss even if you exercised for a different reason.

• No company-stock vest falls in the 30 days before or after the sale date.
• No ESPP purchase falls in that 61-day window.
• No planned ISO or NSO exercise falls in the window. An ISO exercise is an acquisition; Jonah must place any ISO exercise outside the window around a loss sale.
• Your spouse is not buying the same stock.
• Dividend reinvestment is off.
• The company trading window is open.
• You know which lots you are selling and their basis.
• The gain you want to offset is a capital gain, not RSU or NSO wage income.

This week, make the next sale easier to check

Start with dates, not tax software. A simple calendar showing vests, purchases, exercises, blackout periods and sale lots will expose the clean gap before you place an order. If there is no clean gap, write down the cost of selling now and the cost of waiting rather than assuming the loss is fully available.

• Find your next two vest dates and your next ESPP purchase date in the equity portal. Write down the gap between day 31 after one event and day 31 before the next.
• If you already sold at a loss within 30 days before an upcoming vest, the vest will still happen. Record the share count and expected disallowed amount now so the basis adjustment is ready at tax time.
• Pause dividend reinvestment on company stock. Kestrel Bay Retirement Advisors clients can send the vest schedule through the request form, and the team will mark the clean windows for the rest of the year.

How Kestrel Bay Retirement Advisors can review the calendar

Kestrel Bay Retirement Advisors reviews the vest schedule beside your brokerage lots, ESPP activity and planned option exercises. It then explains which loss should count this year and which amount may move into replacement-share basis. Fees are explained before work begins, and a conversation starts when you send us your vest dates through the site.

This page is general education and is not advice on your own taxes, investments or legal situation. A tax preparer should handle gray areas such as withheld shares and the final Form 8949 entry. Kestrel Bay Retirement Advisors can help you see the timing problem before the trade.