RSUs can significantly impact your tax situation. Here's a clear breakdown of what you need to know about RSUs and their tax implications.

When Are RSUs Taxed?

RSUs are taxed at two key moments:

1. When they vest (become yours)

• The fair market value of the shares on the vesting date is treated as ordinary income
• Your employer typically withholds some shares for taxes
• This amount appears on your W-2 as compensation

1. When you sell the shares

• You'll pay capital gains tax on any increase in value since vesting
• If you sell immediately after vesting, there's usually minimal capital gains tax
• Holding shares longer may result in either short-term or long-term capital gains

Calculating Your RSU Taxes

For Vesting

1. Determine the fair market value (FMV) of shares on vesting date
2. Multiply FMV by number of vested shares
3. This amount is taxed as ordinary income at your regular tax rate

For Selling

1. Calculate your cost basis (FMV at vesting)
2. Subtract cost basis from sale price