Tax Implications of Restricted Stock Units (RSUs)

Tax Implications of Restricted Stock Units (RSUs)

Restricted Stock Units (RSUs) have become a popular form of compensation for employees in various industries.

 RSUs are typically awarded to employees as part of their compensation package, granting them the right to receive company stock at a future date.

The grant date of RSUs is an important starting point for understanding their tax treatment. 

 On the grant date, RSUs are not subject to income tax since they do not have a readily determinable value. 

The vesting period is the duration during which an employee must remain with the company to earn the right to receive the RSUs. 

When RSUs vest, they become subject to income tax. 

At this point, the fair market value of the RSUs on the vesting date is included in the employee's taxable income, subject to federal, state, and local taxes, as applicable.

Upon the vesting of RSUs, employers are generally required to withhold taxes on the value of the RSUs as part of the employee's compensation. 

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