Tax
Restricted Stock Unit (RSU)
A grant of company shares that vests over time and is taxed as ordinary income at vest.
RSUs are taxed as ordinary W-2 income on the FMV at vesting. The employer typically withholds shares to cover the tax (often at 22% federal supplemental, which is usually too low for high earners).
After vest, the employee owns the shares. Subsequent appreciation/depreciation is capital gain/loss, measured from the FMV at vest.
Common pitfalls
- Under-withholding at vest leads to large balances due at filing
- Mistakenly cost-basis-doubling on the W-2 income in the 1099-B reconciliation
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