Selling RSUs at a Loss: How Your Next Vest Quietly Triggers the Wash Sale Rule.

A senior engineer at a public chip company watches the stock slide 35% below her vest prices and decides to do what every tax article recommends: sell the underwater shares, harvest the capital loss, and bank it against this year's gains. Four weeks later her regular monthly vest deposits 90 new shares into the same account. Most of the loss she thought she harvested just vanished from this year's return. Selling RSUs at a loss collides with the wash sale rule in a way ordinary stock picking never does, because an RSU holder keeps acquiring stock on a schedule she does not control.

Section 1091(a) does not ask why you acquired the replacement shares, only whether you acquired them. The day RSUs vest, you receive shares of your employer's stock with a basis equal to that day's market price, and the value lands on your W-2 as compensation. For wash sale purposes that delivery is an acquisition of substantially identical stock, full stop. It does not matter that the vest was scheduled years ago in a grant agreement, that you never clicked a button, or that your broker sold a slice of the delivery to cover withholding. The net shares that hit your account are replacement shares if they arrive within 30 days of a sale at a loss, and the window runs in both directions, so a vest three weeks before your sale washes it just as thoroughly as a vest three weeks after.

The vesting calendar decides how much room you have. On a quarterly schedule there is a usable gap in the middle of each quarter, from 31 days after the last vest to 31 days before the next one. On the monthly schedules that became standard at large tech companies, every day of the year sits within 30 days of some vest, which means every sale of company stock at a loss washes at least partially, automatically, forever, for as long as the grants keep vesting.

The rule disallows losses share for share, not all or nothing. If you sell 300 shares at a loss and acquire 120 within the window, the loss on 120 of those shares is disallowed and the loss on the other 180 survives. The disallowed piece moves into the basis of the 120 replacement shares under §1091(d), and the holding period of the shares you sold tacks onto the replacements under §1223(3), which preserves long-term status.

In a taxable account a wash sale is a timing penalty, not a confiscation. The basis bump means the deferred loss comes back the next time you sell the replacement shares and stay out of the stock for 30 days. The timing can still hurt: a December sale washed by a January vest pushes the deduction into a different tax year, which matters if you were counting on it against this year's gains. The one true trapdoor is Rev. Rul. 2008-5. Buy substantially identical shares inside your IRA or Roth IRA during the window and the loss is disallowed with no basis adjustment anywhere, gone permanently. Publication 550 extends the reach further than most people expect: purchases by your spouse, or by a corporation you control, count against you too.

Brokers report wash sales in box 1g of Form 1099-B, but the reporting rules only require them to flag wash sales between identical securities, same CUSIP, held in the same account. A sale at Schwab washed by a vest at your employer's captive broker, a purchase in your spouse's account, or an ESPP purchase that lands inside the window will not appear in box 1g, and it is still your obligation to report the adjustment on Form 8949 with code W. The reverse mistake is just as common: taxpayers who see a box 1g amount and subtract it a second time. And remember that the loss math only works if your basis is right in the first place; RSU basis errors are the same species of problem as the 22% withholding gap that surprises RSU holders every April.

On a quarterly schedule, harvest in the mid-quarter gap and the rule never touches you. On a monthly schedule, accept that some slice of any harvested loss will defer and plan around it: sell early in the year so a washed December loss does not slip across the year boundary, never repurchase in an IRA during the window, and if you are exiting the position entirely, keep selling each newly vested lot as it arrives. Each of those sales realizes the loss that was deferred into that lot, so the deferral rolls forward and collapses when the vesting stops. What I would not do is skip the harvest out of fear. A partially washed loss in a taxable account still delivers most of its value, just on a slight delay, and the shares you keep get a higher basis for the next sale.