Tips for Managing GSUs (Google RSUs)
Google is one of the most famous and valuable tech companies and it’s constantly finding ways to innovate - even if it’s sometimes just fun or silly.
Google offers many of its employees Restricted Stock Units (RSUs), but because Google is a super-cool and innovative company, they don’t just offer regular RSUs, they offer GSUs (Google Stock Units).
Whether you’re a Noogler or have been at Google a long time, it’s important that you understand how to manage your GSUs.
There aren’t many companies that compensate employees like Google does and, as you know if you work for Google, GSUs are likely to make up a good portion of your compensation package.
The purpose of this article is to equip you with the knowledge you need to manage your Google Stock Units (GSUs) so that you can turn them into lasting wealth.
We’ll do this by reviewing some key GSU terms, discussing how GSUs are taxed, and helping you work through a few exercises to figure out how much Google stock you should hang onto.
Google Stock Units (GSU) Key Terms
In order to effectively discuss how to manage GSUs, we need to go over a few terms related to your GSUs. We’ve written a more detailed list of RSU terms to know, but below we’ve compiled a quick summary.
Grant date - is the date on which you receive your grant of GSUs
Vesting Schedule - is the timeline under which your GSUs will be released to you and officially become GOOG shares that you own outright. GOOG offers slightly different vesting schedules based on your level and how many GSUs are being granted. We’ll discuss GOOG’s vesting schedule for GSUs in a second.
Vested/Unvested - shows which GSUs have already been released to you vs still need to meet vesting requirements. If you quit with unvested RSUs, you will likely forfeit them.
Vest Date - is the date on which your GSUs are released to you.
Ordinary Income - is the type of income that GSUs cause when they vest
Tax Withholding - as GSUs vest, GOOG will set aside a portion of the vested amount for taxes. (We’ll discuss this more in the next section.)
GSU Vesting Schedule
Vesting schedules at most companies tend to be very boilerplate and don’t change a whole lot from one employee to the next. GOOG has a primary vesting schedule, but the timeframe of vesting within the vesting schedule can vary based on the size of the grant of GSUs.
GOOG has its GSUs typically vest over the following timeframe:
38% in Year 1
32% in Year 2
20% in Year 3
10% in Year 4
Depending on the number of GSUs you’re expected to receive in a given year, GOOG will divvy up the annual percentage either Monthly or Quarterly.
So for Year 1, the 38% would turn into either 3.17% monthly or 9.51% quarterly.
Although this may seem like a boring detail, it’s actually very important, especially once we start discussing taxes and the timing of sales.
How GSUs are Taxed
GSUs are taxed at two points in time.
At vest
At sale
At vest, your GSUs are treated as wages and are taxed as ordinary income.
At sale, your GSUs are taxed as capital gains or treated as capital losses.
Since GSUs are taxed at vest, it doesn’t matter what your GSUs were worth back when they were first granted. All that matters is the value at vest.
This means that if you had 200 GSUs that vested at $190, you’d have additional taxable income of $38,000. It doesn’t matter if the stock price rises or falls after that point, taxes are calculated based on the value at vest.
GSU Tax Withholding
GOOG has a requirement to withhold from GSUs as they vest to ensure taxes are paid.
If you make less than $1M, GOOG usually withholds 22%.
If you make more than $1M, GOOG usually withholds 37%.
This is critical because if you have GSUs, withholding at 22% probably isn’t enough!
For example, if you have $500k worth of GSUs vest, you might only have 22% withheld for taxes. Depending on your salary, your actual tax rate is probably closer to 32% or 35%. This means if you don’t do anything, you're likely to be surprised with a $50k+ tax bill!
GSUs and Wash Sales
If you have monthly vesting on your GSUs, there’s a really good chance you'll eventually be affected by Wash Sale rules.
A wash sale happens when you sell a stock at a loss and buy the same stock within 30 days. The IRS doesn't let you claim the loss on your taxes immediately. Instead, the loss gets added to the cost of the new stock. (The 30 days also extends to 30 days before your sale, so really it’s like a 60-day window in total.)
Here’s a graphic that hopefully helps you visualize:
The gray box is the period of time wash sale rules would apply. The green check boxes represent you being in the clear, not having to worry about them.
How Wash Sales Apply to GSUs
Since it’s likely that your GSUs are vesting monthly, it means that the IRS sees you as purchasing GOOG shares every month. Because of these monthly “purchases” if you try to sell your GSUs for a loss there’s a very high chance you might not be able to use that loss for a benefit immediately.
If you sell GSUs at a loss either within 30 days before a purchase/vest or sell GSUs for a loss within 30 days after a purchase/vest, you’re likely going to trigger a Wash Sale.
All this discussion of wash sales isn’t meant to scare you. The reality is that much of the time wash sales are unavoidable, so there’s no reason to stress over them.
Adjust Tax Return After Selling GSUs
Many Googlers are die-hard DIYers which is totally understandable. As outsiders, it’s our assumption that you must be a pretty smart individual to work at Google which means you probably do a good job DIYing.
If you’re a DIYer at Google, you likely use TurboTax, FreetaxUSA, or some other form of tax prep software. All these software are totally fine; however, it’s important that you’re aware of potential errors that are often made when you sell GSUs and file your own taxes. (Of course, even if you use a CPA, these errors can still show up.)
As we discussed earlier, GSUs are fully taxable at vest. This means that your Cost Basis (what you paid for the stock) is whatever the value of GOOG was on the date of vest multiplied by the shares you own.
The problem is that Etrade/Morgan Stanley likely will not show the cost basis properly on your GOOG shares that were sold. More than likely your cost basis will be reported as $0, which means you could end up paying taxes twice on your RSUs/GSUs.
To help remedy this issue, Etrade/Morgan Stanley will send you a “Supplemental 1099-B” or a “Supplemental Transactions Summary” that shows correct amounts for your Cost Basis, BUT (and this is super important) you will still need to properly use this Supplemental 1099-B when completing your taxes to adjust the cost basis of any shares that were sold in the prior year.
When Should You Sell GSUs or GOOG Shares?
Determining the best time to sell your GSUs can drive any usually rational person mad. It’s impossible to predict with complete accuracy whether the stock price will go up or down, even when we have a sense that it will probably go up.
To help you live without regrets and to help evaluate when you should sell GSUs, we recommend building a solid rationale for why you are selling whatever you intend to sell.
Basically, this entails articulating a personalized reason for why you are selling GSUs, rather than not opting to sell “just because.”
For example:
You might want to sell GSUs/GOOG shares because you’re planning to purchase a home within the next year or two and want to lock in the money you have available for the purchase now.
You have 50% of your net worth tied up in GOOG and while there’s a good chance the company’s stock price keeps going up, you’d have a lot of regrets if the stock dropped and you didn’t take some off the table.
You stress watching GOOG’s stock price so you’d prefer to sell everything immediately after vest and then diversify.
You have student loans you need to pay down and you want to use GSUs/GOOG shares to do that.
There are endless examples we could provide. Much of the work we do with clients is to help them explore: (1) why you should be selling GSUs, (2) what might happen if you don’t sell GSUs, and (3) what are the potential long-term effects of either selling or not selling.
We’re particularly helpful in this exercise because we have no incentive to manage your investments. We’re here to advise, and that’s it.
What If You Have Highly-Appreciated GOOG Shares?
If you haven’t sold your GSUs or GOOG shares, they’re probably worth more now than you ever imagined they’d be worth. If this is the case, we highly recommend reading our article on how to avoid taxes on RSUs.
There are some great tools and strategies that you can use to help reduce the taxes you’ll ultimately end up owing when you sell GOOG shares. But these strategies will vary based on (1) how big of a gain you have in GOOG, and (2) your current situation/preferences.
Final Thoughts on Managing GSUs
Google is one of our favorite tech companies ( and we’re not just saying that in hopes that Google makes this article more visible when people do a search)!
The way Google compensates its employees provides great opportunities to achieve financial success and GSUs offer an especially valuable benefit to accomplish this.
But it’s also important to remember that simply receiving GSUs isn’t enough. It’s vital that you figure out a good game plan for what you should do with your shares.