RSUs Vesting Soon? A Guide to Sell, Hold, and Reinvest
Last reviewed: September 2026 · Educational, not individual advice
If you would not spend that cash buying your employer's stock today, selling most of your RSUs at vest is a reasonable default. Two Maryland traps: the 22% default withholding is too low, and holding a year for long-term rates helps only on the federal side. Maryland taxes the gain as ordinary income, plus 2% above $350,000 of federal AGI.
If you have RSUs vesting soon and you live in Maryland, Northern Virginia, or DC, you are probably asking three things: sell, hold, or something in between? What do I do with the proceeds? And what should I check before I click anything? At Allset Wealth we help tech and biotech professionals in the DC metro turn equity compensation into a plan. This guide walks through the decisions in the order that usually matters most.
Meet Grace: four questions before vest day (hypothetical)
Hypothetical composite household, not a client. For education only.
Grace is 35, lives in Montgomery County, and holds a senior role at a large public tech company.
- Salary: $250,000
- RSUs vesting next month: $200,000, with more tranches later in the year
- Her husband Steven holds ISOs at a startup (more on that below)
Her four questions: What is a sensible RSU strategy? Should I sell or hold? If I sell, what do I buy? What else should I think through first?
Should you sell RSUs at vest or hold them?
The one honest question. "If my company paid me $200,000 in cash today, would I use all of it to buy my employer's stock?" If the answer is no, selling most or all at vest is a reasonable default for many people. It is not a vote against your company.
"But I feel connected to the company." Many people do not want to sell because they feel loyal. They helped build the product. They trust leadership. Selling can feel like betraying the team. That feeling is human. Investing is different. Think of it as risk management, not disloyalty: you can believe in your company and still cap how much of your wealth rides on one stock. Your paycheck already ties you to the company. Your entire nest egg does not need to as well.
What if the stock drops hard? Say a colleague at a large software company kept 50% of her portfolio in employer stock. In one bad year the stock fell about 40%. She did not lose 40% of her job; she still had her salary. But her investment wealth shrank by roughly 20%. Now imagine that drop when you are 15 years from retirement, counting on that money for college, or planning to scale back work. A 20% hit on investable assets is years of savings undone. Would you choose that outcome if the same $200,000 were cash in your hand? Probably not. That is the point: separate personal feelings from the investment decision. We wrote up what a 25% drop does to a concentrated position after Salesforce's slide in early 2026.
A guideline many advisors use: keep employer stock at 10% to 20% or less of investable assets. You can stay proud of where you work. You just do not have to concentrate there.
What tax do you owe when RSUs vest, and is 22% withholding enough?
Once Grace settled the sell-versus-hold question, we mapped the tax side. RSUs are a bonus paid in stock. The rules are straightforward but easy to underestimate.
| When | What happens |
|---|---|
| Grant | Nothing taxable. You have a promise of future shares. |
| Vest | Taxable. The full value counts as ordinary income, the same as salary, and becomes your cost basis. |
| Sell later | Only the change in value after vest is a capital gain or loss. |
Grace's vest: $200,000 of shares hits her W-2 as income. That $200,000 is also her cost basis. If she sells later at $250,000, only the $50,000 gain gets capital gains treatment.
Maryland note. RSU income is wages for Maryland too: state tax at 4.75% to 5.75% for most earners (6.25% above $500,000 and 6.5% above $1,000,000 of taxable income since tax year 2025), plus the county rate. Montgomery County charges 3.2%; the County Council approved a 3.3% rate for higher earners in May 2026, so check the Comptroller's county table for the year you file.
Is default withholding enough? Employers withhold the federal supplemental rate of 22% on RSU income (37% once your supplemental wages for the year pass $1 million), plus Maryland state and county tax. That is a payroll default, not a personalized estimate. At $250,000 of salary plus $200,000 of RSUs, Grace and Steven file jointly in the 32% or 35% federal bracket, so every RSU dollar is under-withheld by 10 to 13 cents. On a $200,000 vest that is a $20,000 to $26,000 gap waiting for April.
What to do instead: add salary, all expected vests, and bonus to estimate full-year income; compare projected tax to projected withholding; close the gap with extra W-4 withholding on salary, a quarterly estimated payment, or by selling a slice of the vested shares for taxes. The safe harbor rule (pay in 100% of last year's tax, or 110% if last year's AGI was above $150,000) usually protects you from penalties even if you still owe at filing. The full math is in our guide to how to fix 22% withholding and hit safe harbor.
Does Maryland tax RSU gains at a lower long-term rate?
This is the part the national "hold a year for long-term rates" advice gets wrong for a Maryland household. On the federal side, holding shares more than a year after vest turns the gain into a long-term capital gain: 15% for most filers, 20% once taxable income passes $545,500 (single) or $613,700 (joint) in 2026, plus the 3.8% net investment income tax above $200,000 / $250,000 of MAGI.
Maryland does not have a lower rate for long-term gains. The gain is ordinary income at the state and county rates above. And since tax year 2025, Maryland adds a 2% surcharge on net capital gains for anyone whose federal AGI exceeds $350,000 (Comptroller Technical Bulletin 58). Retirement accounts and a primary residence sold for under $1.5 million are exempt; RSU shares in a brokerage account are not.
| Layer | Sold within a year (short-term) | Held more than a year (long-term) |
|---|---|---|
| Federal income tax | 35% ordinary = $17,500 | 15% or 20% = $7,500 to $10,000 |
| Net investment income tax | 3.8% = $1,900 | 3.8% = $1,900 |
| Maryland state + Montgomery County (5.75% + 3.2%) | 8.95% = $4,475 | 8.95% = $4,475 (no long-term rate) |
| Maryland 2% capital gains surcharge | $1,000 | $1,000 |
| Total | about $24,900 | about $14,900 to $17,400 |
Holding a year still saves federal tax in this illustration, but the Maryland layer is identical either way. The decision to hold should rest on whether you want that much single-stock risk for another year, not on the state tax.
You sold the RSUs. Now what?
Selling is step one. What you buy next is where the long-term plan begins. Once you are out of a concentrated position, the goal is a diversified portfolio with a tax-efficient structure that fits your timeline, cash flow, and future vests.
Build a diversified core
- Global index portfolio. Low-cost funds covering US stocks, international stocks, and bonds. Simple, efficient, and a strong default for most RSU recipients.
- Actively managed strategies (a slice). Professional managers picking stocks or sectors. Higher fees. Reasonable as a portion, not the whole.
- Direct indexing. Individual stocks held in a basket that tracks an index, which allows tax-loss harvesting in taxable accounts. Especially useful when you have repeated large vests.
- Private equity and alternatives (optional). Long lock-ups and higher complexity. Only a small allocation if your cash flow and net worth can handle illiquid money for years.
Pair diversification with tax efficiency. After RSU sales, three layers work together: asset location (tax-efficient assets in taxable accounts, tax-deferred assets where they belong), tax-loss harvesting (especially through direct indexing when vest income pushes you into higher brackets), and an ongoing vest calendar that aligns each future vest with withholding, concentration limits, and reinvestment. If your plan allows after-tax contributions, the after-tax 401(k) vs Roth 401(k) decision is often the next lever; with kids, the Maryland 529 guide covers the state deduction.
Grace's plan in this illustration: a globally diversified index core, direct indexing on the side to help offset tax from future vests, and no private equity yet. Her priority was clarity and liquidity.
RSUs plus ISOs: the trade-off nobody talks about enough
Steven's picture is harder. He holds ISOs at a startup, and the usual advice ("exercise early and wait for long-term capital gains") comes with real risks. The basics of how ISOs are taxed are in a separate post; here is the trade-off.
The standard ISO playbook: exercise while the spread (stock price minus strike) is small; hold the shares more than one year after exercise and more than two years after grant; sell as a qualifying disposition at long-term capital gains rates. On paper that can save a lot versus a disqualifying sale.
The catch: you pay now, and the stock can fall later. When Steven exercises he must pay cash for the shares, may owe alternative minimum tax on the spread even though he has sold nothing, and then wait through the holding window. During that wait the stock can drop a lot.
| Upside of early exercise + hold | Downside |
|---|---|
| Smaller spread, less AMT | Cash tied up in one stock |
| Path to long-term capital gains if the stock rises | Stock can drop after you have paid tax |
| Less ordinary income if timed well | RSU vests in the same year can push AMT higher |
So the ISO decision is not "early exercise is good." It is a trade-off that only works inside the whole picture: RSU vests, salary, AMT, cash on hand, concentration limits, and when you actually need the money.
Tax strategies worth asking about
Not every strategy fits every household. These are worth a conversation when RSU income is a recurring part of your financial life.
- Direct indexing. Helpful when you have large taxable accounts and repeated vests.
- Safe harbor timing. If last year's tax was lower, you may be able to delay some payments while staying penalty-free, keeping cash invested until the due dates. Needs accurate math.
- Gifting and charity. Donor-advised funds or gifting appreciated stock can make sense at higher wealth levels, and they sidestep the Maryland surcharge on the gifted shares.
- Estate planning and advanced tools. At the highest brackets, repeated large vests and a growing net worth make estate planning, insurance-based strategies, and wealth transfer relevant. Get full fee disclosure and compare alternatives first.
Your vest-day checklist
- Run the cash test: would you buy this much employer stock with cash today?
- Check your trading window; if it is closed at vest, set a sell order for the day it opens.
- Estimate full-year income including every vest, and compare it with year-to-date withholding.
- Decide how the tax gap gets closed: extra W-4 withholding, an estimated payment, or shares sold for taxes.
- Write down where the proceeds go before the shares land.
- Note your employer-stock percentage of investable assets after the vest, and the number you want it to be.
Bottom line
Sell-versus-hold is a risk decision first and a tax decision second. Run the cash test, fix the withholding gap before April, and remember that Maryland gives you no long-term rate and adds 2% above $350,000 of federal AGI. Then put the proceeds to work in a plan that already knows when the next vest lands.
If you want your vest calendar and tax projection modeled for your household, book a call. More guides for tech employees are on the hub.
FAQ: selling RSUs at vest in Maryland
Should I sell RSUs when they vest?
For many people, yes. If you would not buy that much of your employer's stock with cash today, selling most or all at vest is a reasonable default. Shares sold right at vest have little or no gain, so the sale itself adds almost no tax. The decision is about concentration risk, not loyalty.
Do I pay tax when RSUs vest?
Yes. The full value of the shares at vest is ordinary income on your W-2, taxed at federal rates plus Maryland state and county tax. That value becomes your cost basis. Only the change in price after vest is a capital gain or loss when you sell.
Is 22% withholding enough on a large vest?
Often not. Employers withhold the 22% federal supplemental rate (37% above $1 million of supplemental wages), but a $200,000 vest on top of a $250,000 salary lands in the 32% or 35% bracket. Compare projected tax with withholding and close the gap with extra W-4 withholding or an estimated payment.
Does Maryland tax RSU gains at a lower long-term rate?
No. Maryland taxes capital gains as ordinary income at state and county rates, and since tax year 2025 adds a 2% surcharge on net capital gains when federal AGI exceeds $350,000. Holding shares more than a year lowers only the federal rate, so weigh that against another year of single-stock risk.
What should I buy after selling RSUs?
Most people start with a globally diversified core of low-cost US, international, and bond funds. When vests repeat, direct indexing can add tax-loss harvesting in taxable accounts. Fill tax-advantaged accounts first, and keep employer stock at 10% to 20% or less of investable assets.
Sources
- IRS Publication 525, Taxable and Nontaxable Income (restricted stock units)
- IRS Publication 15 (2026), supplemental wage withholding
- IRS Topic 306, Penalty for underpayment of estimated tax
- Maryland Comptroller, Technical Bulletin 58, taxation of individual capital gain income
- Maryland Comptroller, local income tax rates by county
- Tax Foundation, 2026 federal tax brackets and capital gains thresholds (IRS Rev. Proc. 2025-32)
Disclaimer: This article is for educational purposes only and is not tax, legal, or investment advice for your specific situation. RSU and ISO rules vary by employer plan and personal circumstances. The household above is a hypothetical composite, not a client. Consult your CPA and a licensed fiduciary before acting.
Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Allset Wealth.
