RSU planning questions to work through
Restricted stock units are taxed as income when they vest, which surprises many people the first year. This guide lists the planning questions that typically come up so you can organize your own situation. It is educational and not a recommendation to hold or sell.
Vesting and taxes
When does each grant vest, and how much income will that create this year? Employers usually withhold at a flat supplemental rate, which may be lower than your actual tax rate. Checking the gap ahead of time avoids a surprise at filing.
What happens after vest
Once vested, the shares are yours, with a cost basis equal to their value at vest. Many people decide in advance what they will do with newly vested shares rather than deciding each time. Our RSU tax guide explains the mechanics.
Fitting RSUs into the bigger picture
How much of your net worth is in one company's stock? How do upcoming vests affect cash needs, savings goals and estimated tax payments? These are the questions that usually involve a CPA and, for some people, a financial planner.
What to gather
- Your vest schedule for the next 12 months
- Withholding rate versus expected tax rate
- Share of net worth in employer stock
- Who tracks cost basis for vested shares
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Frequently asked questions
Are RSUs taxed when granted?
Generally no. They are typically taxed as ordinary income when they vest, based on the share value at that time. A CPA can confirm treatment for your grants.
Is this equity compensation guide advice?
No. Sam's List writes these guides for education. They describe common questions and processes, not advice for your specific situation.
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