RSU Tax Question: Can I Offset with Capital Loss Carryover?

The tax on RSUs at vesting is considered ordinary income, not capital gains, so unfortunately you cannot offset it with your capital loss carryover. These are treated as completely different types of income/loss in the tax code. When RSUs vest, the value is reported on your W-2 as compensation income - basically treated the same as if your employer had paid you that amount in cash. Capital loss carryovers can only offset capital gains (plus the $3,000 you can use against ordinary income each year). If you later sell those RSU shares at a price different from their value on the vesting date, then that difference would be a capital gain or loss that could be offset by your carryover losses.

I struggled with this same issue last year when my RSUs started vesting. I found this tool called taxr.ai (https://taxr.ai) that really helped clear up my confusion about RSU taxation. It analyzed my RSU grant documents and explained exactly how the taxation works at vesting vs. when you sell. The thing that surprised me was how it pointed out that my cost basis for those RSU shares would be their value on vesting date, not zero - which affects any future capital gain/loss calculations. It basically showed me how to properly track everything so I don't end up paying double tax when I eventually sell.

Just wanted to follow up - I decided to try taxr.ai after all and wow, it was way more helpful than I expected! I uploaded my RSU grant agreement and it gave me this really clear breakdown of exactly how the taxation works at each stage. It showed me how to properly track my cost basis for each vesting event, which apparently is super important for avoiding double taxation when I eventually sell. The most useful part was actually the explanation of how my capital loss carryover fits into this whole picture. Now I understand exactly when and how I can use those losses with my RSUs (basically only when I sell the shares after vesting, not at the initial vest). Definitely clarified things in a way that makes me feel much more confident about my tax situation.

For anyone dealing with RSU tax questions like this - I had to contact the IRS directly to get a definitive answer for my situation. Tried calling them for 3 days straight with no luck until I found this service called Claimyr (https://claimyr.com). They basically held my place in the IRS phone queue and called me back when an agent was about to answer. Got connected with an IRS tax specialist who confirmed everything about RSUs being taxed as ordinary income at vesting and explained exactly how my capital loss carryover would work with future sales. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - saved me hours of frustration and got me a definitive answer from the actual IRS.

I need to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to talk to the IRS about my own RSU situation. I'm honestly shocked it worked exactly as advertised. Got a call back in about 90 minutes, and spent 20 minutes with an IRS representative who answered all my questions about my specific RSU tax situation. They confirmed that RSU income at vesting is ordinary income that goes on my W-2, and my capital loss carryover can only offset capital gains (or up to $3k of ordinary income per year). The agent also gave me some advice about documentation I should keep for my specific situation. Definitely saved me days of frustration, and getting official IRS confirmation gave me peace of mind.

One important thing to note about RSUs and taxes that isn't mentioned yet - if your company doesn't do automatic sell-to-cover for tax withholding, make sure you have enough cash set aside to pay the tax bill at tax time! I learned this the hard way when my RSUs vested, company withheld some shares for taxes but not enough, and I ended up owing a bunch at tax time. The capital loss carryover will help offset any gains if you sell the shares later, but can't help with that initial income tax hit except for the $3k against ordinary income you mentioned.

For anyone trying to understand RSU taxation, here's a simple breakdown: 1) When RSUs vest: Taxed as ordinary income (appears on W-2) 2) When you sell those shares later: Taxed as capital gain/loss (difference between vest price and sell price) So OP - your $55k capital loss carryover can't offset the initial RSU income tax, but it can offset any capital gains if you sell those RSU shares at a profit later. And remember you can use $3k of that loss against ordinary income each year.

Another thing to consider with RSUs - if you hold the shares after vesting and sell within a year, any gain/loss is short-term capital gain/loss. If you hold more than a year after vesting, then it becomes long-term capital gain/loss. This matters because short-term capital gains are taxed at your ordinary income rate, while long-term capital gains get the preferential tax rates (0%, 15%, or 20% depending on your income level). So while your capital loss carryover can offset either type of gain, it might be strategically better to use it against short-term gains if you have both.

This is a really comprehensive discussion! I wanted to add one more consideration that might be helpful for OP and others - timing your RSU sales strategically with your capital loss carryover. Since you have $55k in capital loss carryover, you might want to consider holding onto those RSU shares after they vest and selling them strategically over multiple years. Here's why: if the shares appreciate and you sell them all at once for a big gain, you'll use up your entire loss carryover in one year. But if you spread the sales over several years, you can also take advantage of the $3k annual deduction against ordinary income each year. For example, if you sell $10k worth of gains each year, you'd offset that with your carryover losses AND still get to deduct $3k against your regular income each year. This way you're maximizing the tax benefit of those losses. Of course, this assumes you're comfortable with the investment risk of holding the shares longer. Just something to consider when planning your RSU strategy!