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Tax Planning for GSUs Sold Through Google’s Employee Trading Plan (ETP)

If you work at Google, a meaningful part of your compensation likely comes in the form of Google restricted stock units (GSUs). GSUs can be great for building wealth, but the rules around GSU taxation can also be complex.

Things can get even more nuanced when you sell shares through Google’s Employee Trading Plan (ETP), which adds timing rules, blackout windows, and preset sale mechanics to the mix. This is especially relevant for higher‑earning Googlers, where under‑withholding and multiple sale lots can create tax surprises.

In this article, we’ll walk through GSU taxation, where Google’s ETP can add complexity, and how to structure your plan so it supports your goals and reduces unwelcome surprises at tax time.

Understanding the Basics of GSU Taxation

GSUs generally create two separate tax events: one when the shares vest and another when you eventually sell them.

#1: Taxes at Vesting: Ordinary Income

When your GSUs vest, the IRS treats the value of those shares as compensation, just like a cash bonus. This tax recognition at vest is automatic and unavoidable for typical GSUs, whether you hold the shares or sell them right away.

Here’s what happens at vesting:

The fair market value (FMV) of the shares on the vest date is added to your W‑2 income from Google.
The IRS considers that income to be ordinary income and taxes it at your marginal federal tax rate. It’s also subject to Social Security, Medicare, and applicable state and local taxes.

It’s important to note that Google typically satisfies withholding by either selling a portion of your vested shares (“sell to cover”) or withholding shares. This is why the number of shares you actually receive is often lower than the number that vested.

This withholding is based on IRS supplemental wage rules: a default federal withholding rate of 22% on total supplemental wages up to $1 million, and 37% on supplemental wages above that threshold. For many high‑earning Googlers, that 22% rate is well below their actual marginal federal tax rate, which often leads to a meaningful shortfall at tax time unless they increase withholding elsewhere or make estimated tax payments.

#2: GSU Taxation at Sale: Capital Gains or Losses

Unlike taxes at vesting, which you can’t change, timing, holding period, and how you’ve set up your ETP influences taxes at sale. Once your shares vest and are in your brokerage account, the focus shifts from ordinary income to capital gains and losses.

Here’s what happens when you sell your vested GSUs:

You recognize a capital gain or loss based on the difference between the sale price and the fair market value on the vest date (your cost basis).
If you sell within one year of the vest date, any gain is generally taxed as a short‑term capital gain at your ordinary income tax rates.
If you sell after holding for more than one year from the vest date, any gain is treated as a long‑term capital gain, which qualifies for long‑term capital gains rates that are often lower than ordinary income rates for many taxpayers.
Selling at a loss can offset other capital gains and, to a limited extent, ordinary income.

This is where planning matters, especially when selling through Google’s Employee Trading Plan. How you set up your ETP determines which shares are sold first, which tax lots are realized in a given year, and whether those gains are short‑term or long‑term—all of which affect your overall tax obligation.

How Google’s Employee Trading Plan Works

Google’s Employee Trading Plan (ETP) lets eligible Googlers set up stock sales in advance and have them run automatically. The plan functions as a 10b5‑1‑style trading arrangement: you establish instructions when you aren’t aware of material non‑public information, and thereafter trades can execute on a preset schedule, even during blackout periods, based on those instructions.

When you enroll, you decide how the plan should operate. You choose:

Which shares to sell (for example, a percentage of newly vesting GSUs, previously vested GSUs, or other company shares you already own).
How many shares or what percentage of each vest to sell.
How to select the shares for tax purposes, such as using a particular tax‑lot method like first‑in, first‑out (FIFO) or last‑in, last‑out (LIFO). If you do not make a specific lot‑selection election, a default method (often FIFO) will typically apply under the plan’s rules.

After a required cooling‑off period between when you set up the plan and when trades can start executing, the plan runs in the background on the defined schedule without requiring you to place individual trades.

Why Selling Through Google’s ETP Can Complicate GSU Taxation

When your GSUs vest, the tax treatment is relatively straightforward: the value of the shares on the vest date is taxed as ordinary income and reported on your W‑2, similar to a cash bonus. Google’s Employee Trading Plan does not change this W‑2 income, the vest‑date FMV, or the fact that the ordinary income locks in at vest.

GSU taxation becomes more complex when selling shares through the ETP because each sale is its own tax event. For every sale, the sale price is compared to the vest‑date price (your cost basis) to determine a capital gain or loss, and the holding period for each lot determines whether that gain or loss is short‑term or long‑term.

When newly vested shares are sold right away at roughly the same market price as at vest, the difference is often small, so the gain or loss is minimal. However, things can get a little more complicated when the ETP also sells shares that vested earlier at very different prices or in different calendar years.

Here’s why:

Shares that vested at different times have different vest prices and holding periods.
You must track each group, or tax lot, separately to determine whether a gain or loss is short‑term or long‑term and to quantify the dollar amount of that gain or loss.
The ETP sells these tax lots based on the rules you set during enrollment (for example, FIFO vs. LIFO).
Over the year, the plan may sell a mix of short‑term and long‑term shares.

Although they’re ultimately taxed under different rate structures, all sales are reported together on your Form 1099‑B, often as many individual line items. Careful review is necessary to confirm basis, avoid double‑taxation, and properly classify each gain or loss.

The Withholding Gap

Withholding adds another layer of complexity to GSU taxation. When GSUs vest, Google withholds taxes at the flat supplemental wage rate, which is often lower than a high earner’s actual marginal rate. That means that even with withholding at vest, you may still owe additional federal and state tax on your GSU income.

Combined with capital gains from ETP sales—especially if the stock has appreciated significantly since vest—this can result in an unexpected balance due and, in some cases, estimated tax penalties. You can proactively adjust your withholding, schedule quarterly estimated payments, or both to avoid unwanted tax surprises.

NIIT and State Tax Considerations for High Earners

For many high earners at Google, GSUs and ETP sales do more than just raise ordinary income and capital gains. They can also trigger or increase exposure to the 3.8% net investment income tax (NIIT), which applies when your modified adjusted gross income (MAGI) exceeds certain thresholds. Large realized gains from selling GSUs can push you over those thresholds or increase the portion of your investment income subject to the tax.

State and local taxes can also complicate matters, especially for Googlers in high‑tax states or those who move between states while grants are vesting. Many states treat GSU income as compensation sourced to the state where the work was performed between grant and vest, which can create unexpected state filing obligations or partial‑year allocations if you change residency.

For example:

Suppose a Googler lives and works in California when Google awards them a large GSU grant, then moves to Washington (no state income tax) two years later, before the grant fully vests.

Even if the employee is a Washington resident when the remaining GSUs vest, California can still tax the portion of that income tied to work performed in California between grant and vest. As a result, the Googler may need to file a California nonresident or part-year return, allocate part of the GSU income to California based on workdays or a similar method, and report the remaining income in Washington rather than taxing it all in their new state.

If you have, or expect to have, very large GSU‑driven income and gains, it’s worth including NIIT and state considerations in your ETP and sale strategy. That might mean shifting some sales between calendar years, coordinating timing with other large income events, or planning around a residency change to avoid unexpected multi‑state complexities.

Best Practices When Setting Up Your Google ETP

When you enroll in Google’s Employee Trading Plan, the goal is to turn one‑off decisions into a repeatable, written strategy that matches your risk tolerance, tax picture, and career plans. Here are some best practices for setting up your ETP:

Start with your diversification target. Decide how much of your net worth you are comfortable having in Alphabet stock (for example, no more than 10%–20% of investable assets), and use the ETP to systematically sell anything above that range.
Choose a sell pattern that matches your life, not the stock price. Consider whether you want sales aligned with each vest date, spread monthly/quarterly, or clustered to match big cash‑flow needs (e.g., estimated tax due dates, home purchase timeline).
Be intentional about tax‑lot method (FIFO vs. LIFO). FIFO generally sells your oldest shares first, which more often produces long‑term gains. LIFO sells your most recently vested shares, which tend to have shorter holding periods and more short‑term exposure.
Coordinate ETP settings with your tax situation. If you anticipate a major change like a promotion, sabbatical, move to a different state, or large non‑Google liquidity event, update your ETP elections to reflect the new tax and cash‑flow reality rather than letting an old pattern continue by default.
Preserve flexibility where you need it most. If your situation is complex (multi‑state, cross‑border, very large grants, or tight blackout constraints), consider pairing the standard ETP with broader 10b5‑1 planning or professional advice so your trading rules, tax strategy, and long‑term goals all point in the same direction.

Align Your Google ETP with Your Broader Financial Goals

GSUs can play a meaningful role in building long-term wealth, but selling them through Google’s Employee Trading Plan can create tax consequences that aren’t always obvious. Setting up your plan thoughtfully helps ensure those decisions align with your career path, current tax situation, and broader financial goals.

You don’t have to navigate this alone. At Simplicity Wealth Management, we work closely with tech professionals on the practical realities of equity compensation. Our clients include current and former Googlers managing GSU decisions, and we’ve also shared our employee benefits expertise through Google webinars, giving us firsthand experience with how these plans operate in the real world.

We help clients make informed decisions around their GSUs, reduce unnecessary tax friction, and integrate equity compensation into the rest of their financial plan. If you’re ready to take a more intentional approach, schedule a complimentary Simplicity Session to start building a strategy that fits your life.

For additional guidance, download our free guide, The Tech Equity Blueprint, for clear, practical insights on equity compensation and benefits planning.

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