Executive Summary
What is tax-loss harvesting with RSUs and stock options?
After RSUs vest or you exercise options, you may hold company stock. If you sell those shares below your tax cost basis, you realize a capital loss. You can use that loss to offset capital gains and, if net losses remain, deduct up to $3,000 against other income per year (with carryforward). This is different from the ordinary income tax due when RSUs vest—that timing is covered in our RSU tax guide and IRS Publication 525 as wage/compensation income, not loss harvesting.
Looking for IRS Publication 525 and RSU vesting / wages? That topic is ordinary income at vest, W-2 reporting, and withholding—not tax-loss harvesting. Use the RSU tax guide (Publication 525 & vesting income). This page is only about capital gains and losses on sales after you already own the shares.
The bottom line: Harvest losses on post-vest or post-exercise stock sales when basis and holding period support a capital loss, stay clear of wash sales, and coordinate with your CPA before year-end trades.
RSU vesting income vs. tax-loss harvesting
| Topic | What happens | Where to read |
|---|---|---|
| RSUs vest | Ordinary income (compensation), usually W-2 wages based on FMV at vest | RSU tax guide, IRS Pub. 525 |
| Sell vested shares at a loss | Potential capital loss (Form 8949 / Schedule D), subject to basis rules and wash sales | This guide |
Google may show this URL for broad “Publication 525 RSU” queries because the old draft repeated Pub. 525 wording here. This guide does not replace the RSU guide for vesting wage questions.
How tax-loss harvesting fits equity compensation
- RSUs: At vest, you have ordinary income and a tax basis in shares (usually same as the amount included in income). If the stock drops after vest, a sale below basis can produce a capital loss.
- Options: After exercise, your basis combines what you paid plus any amount taxed as ordinary income (NSO) or AMT adjustments (ISO)—your CPA confirms per grant. Selling below that basis can yield a loss.
- Offset: Capital losses first offset capital gains in the same year. Net capital losses can offset up to $3,000 of other income annually; the rest carries forward (see IRS Topic 409).
If shares are held post-vesting and sold later at a loss, that capital loss is reported like other investment losses—not on the same line as the original RSU wage income from vesting.
Wash sale rule (IRC §1091)
If you sell stock at a loss and buy substantially identical stock (or an option to buy it) within 30 days before or after the sale, the IRS may disallow the loss for current-year use (basis adjustment instead). RSU new shares vesting or automatic purchases can inadvertently trigger wash treatment if they overlap a loss sale—model with your advisor before automated vest/purchase dates stack against a planned loss sale.
Practical checklist
- Confirm cost basis on your brokerage 1099-B vs. employer statements (RSU supplemental may adjust basis).
- Map holding period (short-term vs. long-term) before selling for losses.
- Review company blackout windows and 10b5-1 plans if you are an insider.
- Pair with capital gains calculator and, for ISO-specific timing, ISO AMT calculator when modeling.
Related guides
- RSU tax & IRS Publication 525 — vesting, wages, withholding, when income is recognized
- Capital gains and equity — broader sale mechanics
- ISO vs NSO — exercise taxation vs. harvesting after hold
- ESPP tax calculator — separate from RSU vesting; for purchase-plan returns
Primary sources
| Source | Use |
|---|---|
| IRS Publication 550 | Investment income, capital gains/losses |
| IRS Topic 409 | Capital gains and losses, $3,000 rule |
| IRC §1091 | Wash sales |
Disclaimer: This guide discusses legal tax planning concepts only. It is not tax, legal, or investment advice. Rules change; consult a qualified tax professional before trading.