You have decided to sell down a concentrated position in your company stock. The shares came from years of restricted stock unit (RSU) vests, so you hold a stack of tax lots: separate batches, each with its own vest date and its own cost basis (the share price on the day it vested). Which lots you sell first, and which tax years you sell them in, changes the tax you pay to divest the exact same number of shares. Sell the wrong lots in the wrong year and you can hand the IRS thousands of dollars more than the plan next to it, for identical proceeds.
Same shares sold, same dollars raised. The only variable is which lots and which years, and that variable is worth real money.
Your broker's default is usually the worst lot
Left alone, most brokers sell your oldest shares first. That convention is called first-in-first-out (FIFO), and it is almost never the tax-smart choice when you are diversifying. Your oldest lots are usually your lowest-basis lots: they vested when the stock was cheaper, so they carry the largest built-in gain per share. FIFO sells exactly those first, realizing the most gain, and therefore the most tax, for every share you divest.
The Internal Revenue Service lets you do better. Under specific identification, you tell your broker precisely which lots to sell, by vest date and share count, at the time of the sale (Treasury Regulation 1.1012-1(c)). Pick your higher-basis lots and you realize a smaller gain. Pick a lot that is now underwater and you realize a loss that offsets gains elsewhere. The broker records your choice; the tax follows it.
Three levers move the tax
Choosing the sell order well is really about pulling three levers together, not just one.
1. Specific-lot identification (which lots)
Within a single sale, the goal is to realize the least gain for the shares you need to sell. Higher-basis lots realize less gain per share. And any lot trading below its vest-day price is a chance to harvest a loss: under the Schedule D netting rules, a realized capital loss first offsets your capital gains dollar for dollar, and if losses exceed gains you can deduct up to $3,000 against ordinary income each year, with the rest carried forward. On a concentrated position with a mix of winning and losing lots, working the losers against the winners can wipe out a large share of the gain entirely.
2. Long-term timing (which shares are cheap to sell yet)
A lot held more than one year from its vest date qualifies for long-term capital gains (LTCG) rates (0%, 15%, or 20% federal) instead of your ordinary-income rate, which for a high earner can reach 37%. A lot that vested ten months ago is still short-term; sell it today and the gain is taxed as ordinary income. Wait past its one-year mark and the same gain is taxed at the long-term rate. That can cut the tax on that lot by half or more. The catch is that waiting keeps you exposed to the stock, which is the very risk you set out to reduce, so the calculator shows you both numbers: the tax saved by waiting, and the dollars and days that stay at risk while you do.
3. Bracket spreading (which years)
The long-term rate itself is not flat. It steps from 15% to 20% once your taxable income crosses a threshold ($547,800 single, $616,250 married filing jointly in 2026), and the 3.8% net investment income tax (NIIT) kicks in above $200,000 single / $250,000 married filing jointly. Sell your whole position in one year and a big slice of the gain can land in the 20%-plus-NIIT zone. Split the sale across two or three tax years and more of it stays in the 15% band, under the NIIT line. Spreading also gives losses in one year a chance to carry forward and offset gains in the next.
One trap to watch: the wash-sale rule
Harvesting a loss has a catch of its own. The wash-sale rule disallows a capital loss if you buy the same stock within 30 days before or after the sale. For most people that means one thing: a scheduled RSU vest counts as buying the stock. If a vest lands within 30 days of a loss sale, the rule disallows the loss on that many shares (it is a share-for-share match, so a 25-share vest against a 400-share loss sale only disallows the loss on 25 shares, not all of it). Before you harvest a loss, glance at your vest calendar and give the sale a 30-day berth from the nearest vest.
Where to go from here
For your own lots, the RSU Lot Order Calculator shows the lot-by-lot sell order, the year-by-year tax (federal LTCG, NIIT, and state), the per-lot long-term deferral opportunities, and the exact dollar gap versus a first-in-first-out sale on the same schedule.
If you are still deciding how far to sell down, the single-stock concentration risk article walks through the de-concentration playbook, and if the sale is aimed at a specific cash target by a date, selling stock to fund a goal covers that version. To size the withholding on any fresh vests along the way, see the RSU withholding-gap article.
Each calculator here handles one decision in isolation. OptionsAhoy plans the full picture jointly: every RSU vest, option grant, concentrated position, and hedge, across bullish, neutral, and bearish scenarios, into one year-by-year Plan optimized for total after-tax wealth. Free during beta.
Common questions
Which RSU lots should I sell first to pay the least tax?
When you are diversifying, sell your highest-cost-basis lots first, because they realize the smallest capital gain per share, and sell any underwater lots to harvest a loss that offsets gains under Schedule D netting. This is specific lot identification, and it beats the broker default of first-in-first-out (FIFO), which sells your oldest and usually lowest-basis, highest-gain lots first. On a concentrated position the difference is often thousands of dollars of tax. The RSU Lot Order Calculator computes the exact specific-identification sell order and the dollar saving versus FIFO for your own lots.
What is the difference between specific identification and FIFO?
First-in-first-out (FIFO) is the broker default: it sells your oldest shares first, which are usually your lowest-cost-basis, highest-gain lots. Specific identification lets you name which tax lots to sell, so you can pick higher-basis lots to realize less gain, or underwater lots to harvest a loss. The IRS permits specific identification as long as you identify the lots at the time of sale and your broker confirms it. On a concentrated position the tax difference is commonly thousands of dollars.
Should I wait for my RSU shares to become long-term before selling?
Shares held more than one year from vesting are taxed at long-term capital gains rates (0%, 15%, or 20% federal) instead of your ordinary rate, which can reach 37%. Waiting for a lot to cross its one-year mark can cut the tax on that lot substantially, but it keeps you exposed to the stock for longer, which is the risk you are trying to reduce. The RSU Lot Order Calculator shows, per lot, the tax saved by waiting and the days and dollar value that stay at risk, so you can weigh the trade-off yourself.
Educational content for general information, not personalized tax, legal, or financial advice. Consult a qualified professional for your specific situation. See Terms.