Does Selling Company Stock Count Toward My Yearly Income and Tax Bracket?

Someone on Reddit asked whether selling company stock (e.g., the day it vests) counts toward yearly income and whether that pushes you into a higher tax bracket and increases what you owe. Example: $150,000 salary and $60,000 from selling company stock the day it vests (no gain after grant). Is yearly income now $210,000, and will they owe more because they were withheld on a lower bracket? Yes. The value of company stock you receive and sell does count toward your annual income. In that example, total income is $210,000. That can move you into a higher tax bracket, and if withholding was based on salary only, you can owe more at tax time.

Bottom line: Yes. The value of company stock you receive and sell counts toward your annual income. In the example, $150,000 salary plus $60,000 from selling the stock the day it vests means total income is $210,000. That can move you into a higher tax bracket. Only the income above each bracket is taxed at the next rate (marginal rates), but your total tax goes up, and withholding on salary often does not account for one-time vesting or sale, so you can owe when you file.

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Question from Reddit

Does selling company stock go towards my yearly income?

Discussion

I'm using fake numbers for easy math. Let's say I make 150k a year. If I sell 60k worth of company stock the day it vested (no gain in stock price when granted). Does this mean my yearly income is now 210k? If so, if that bumps me into the next tax bracket. I'm probably going to owe since I was paying taxes on a lower bracket. I'm pretty sure it does but just wanted to make sure.

Source: Reddit

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Analysis

The user is asking whether proceeds from selling company stock are included in annual income for tax purposes and how that affects their tax bracket. This involves how vesting and sale of employer stock are reported and how marginal tax brackets work (only the extra income is taxed at the higher rate, but total tax can still go up and withholding may fall short).

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Answer

Yes. The value of company stock you receive and sell does count toward your annual income. In your example: $150,000 salary plus $60,000 from selling company stock the day it vests means your total income for the year would be $210,000. That can move you into a higher tax bracket and, if withholding was based on salary only, you can owe more at tax time.

Why

When you receive stock as compensation (e.g., RSUs) and it vests, the fair market value at vesting is ordinary income in that year, whether you sell the same day or later. So the $60,000 is already part of your taxable income for the year. If you sell the day it vests at that same value, you're not adding extra income beyond the vesting amount; the $60,000 is the same number either way. Your total income for the year is $150,000 + $60,000 = $210,000.

Tax brackets

• Only the income above each bracket threshold is taxed at the next rate (marginal rates). So you're not suddenly "taxed at the higher rate on everything."
• But your total tax goes up because more income is in higher brackets, and withholding on your salary is usually based on your W-4 and paychecks, not on one-time vesting/sale. So if the $60,000 wasn't withheld on (or wasn't withheld enough), you can owe when you file.
• Planning for vesting and sales by modeling your full-year income can help you avoid surprises. You can use Margen to do a deeper dive and prepare your taxes, including salary plus vesting/sale, so you can adjust withholding or make estimated payments if needed.

Related: Form 3921 and ISO Exercise: What to Enter on Your Return · Form 83(b) and Restricted Stock Election · ISO Exercise and Reducing Tax via a Trust · ISO Sell-to-Cover: Tax Implications

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Applicable Sections

Federal / IRS

• IRC § 83: Value of property (including employer stock) transferred in connection with services is included in income at vesting; that amount is ordinary income.
• Marginal tax brackets: Additional income is taxed at the rate for the bracket it falls into; total tax is the sum of tax on each "layer" of income (IRS Tax Brackets).

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Practical Notes

• Vesting = income. The $60,000 at vesting is taxable that year; selling the same day at the same price doesn't add more income; it's already the same $60,000.
• If you sell later at a higher price, the gain (sale price minus value at vesting) is capital gain; if you sell at a lower price, you may have a capital loss. Those affect your total income/tax differently than the vesting amount.
• Withholding: Employers often withhold on vesting (e.g., supplemental rate). If it's not enough for your full-year picture, use estimated tax or adjust W-4 to avoid underpayment.
• Margen can help you model salary + vesting + sale so you see your full-year income, bracket impact, and what you may owe, and prepare your taxes with a clearer picture.

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Limitations

This answer does not cover losses on stock sales, stock options (e.g., NQSOs, ISOs), or state tax. For advice tailored to your situation, consult a tax professional. You can use Margen to do a deeper dive and prepare your return.