Restricted Stock Units
Restricted Stock Units (RSU’s) are shares of company stock that are granted to employees as part of the overall compensation package. Once vested, the shares are owned by the employee and the fair market value of the shares on the vesting date is treated as ordinary income. As a result, the employee is subject to ordinary income taxes. Often, a portion of the shares will be withheld to cover the taxes and the rest will be the employee’s to either sell or hold.
If you immediately sell your RSU’s once they vest, it is essentially the equivalent to a cash bonus. If you choose to hold onto the shares for at least a year after they vest, any gains at the time of sale will be subject to long-term capital gains taxes. You will want to work with your tax professional to understand the specific tax implications at that time.
Individual companies stock option plans may vary. See your companies’ specific plan summary for details. Stock options have the potential to be worth nothing, may be illiquid, restricted from trading, or lack a market in which to trade. There are tax implications from stock options. Payroll taxes, long term capital gains, and ordinary income taxes may apply. Please work with a qualified tax professional for your specific situation. All examples are illustrative in nature and for educational purposes only.
Ready to get started?
We welcome the opportunity to be a resource, listen to you, and provide objective financial advice catered to your unique situation.