How are RSUs taxed? Guide for Americans

If you work for a company that offers restricted stock units as part of your compensation package, you might be wondering how they'll affect your tax bill. RSUs can be a great addition to your paycheck, but the tax treatment catches many people off guard.

How are RSUs taxed and when? How much will you pay? And do you practically get taxed twice on the same shares? All of these are fair questions that need clear answers.

This guide breaks down RSU taxation in straightforward terms so you can plan ahead and avoid surprises come tax season.

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What are RSUs?

Restricted stock units are a form of employee compensation where your employer promises to give you company stock in the future. The catch is that you have to meet certain conditions first, usually staying with the company for a set period of time.

When you're granted RSUs, you don't receive actual shares right away. Instead, you get a promise that shares will be delivered to you later, once you've satisfied the vesting requirements. These requirements typically follow a schedule spread over several years.

Until your RSUs vest, you don't own the stock. You can't sell it, transfer it, or vote with it. Once the shares vest and transfer to you, they're yours to keep or sell.

How are RSUs taxed and when?

RSUs are taxed at two different points: vesting and sale.

Grant date

This is when your employer grants you RSUs, usually as part of a job offer or annual compensation package. At this stage, you don't owe any taxes because you don't actually own anything yet.

Vesting date

This is when the shares officially become yours.

The IRS treats this as ordinary income, similar to receiving a cash bonus. Your employer will usually withhold taxes on the value of the shares at vesting, just like they withhold taxes from your regular paycheck.

Sale date

If you sell your shares after they vest, you'll owe capital gains tax on any increase in value from the vesting date to when you sell them.

The tax rate depends on how long you held the shares after vesting. Short-term rates match your regular income tax bracket, and long-term capital gains rates can reach up to 20% based on your total income.¹

How are RSU taxes calculated during vesting?

When your RSUs vest, the IRS treats them like you just received a paycheck. The taxable amount is the fair market value of the shares on the vesting date.

Here's an example.

If 100 shares vest when the stock is worth 50 USD per share, you owe taxes on 5,000 USD of ordinary income. Your employer will withhold federal and state taxes from this amount, either by keeping some of your shares to cover the tax bill or requiring you to pay cash.

The tax rate is the same as your regular income tax rate.

If you're in the 24% federal tax bracket, you'll pay 24% on the value of your vested shares, plus state taxes and payroll taxes like Social Security and Medicare.

How are taxes calculated when you sell your shares?

If you sell your shares for more than they were worth at vesting, you'll owe capital gains tax on the profit. The tax rate depends on how long you held the shares after they vested:

• Less than one year: You'll pay short-term capital gains tax at the same rate as your regular income.
• More than one year: You'll pay long-term capital gains tax, which is lower than ordinary income tax rates for most people.

For example, your 100 shares were worth 40 USD each when they vested. You already paid ordinary income tax on that 4,000 USD.

Six months later, you sell all 100 shares for 50 USD each, earning 5,000 USD. Your profit is 1,000 USD (5,000 USD - 4,000 USD). Since you held the shares for less than a year, you'll pay short-term capital gains tax on that 1,000 USD at the same rate as your regular income.

If you had waited another seven months to sell, that same 1,000 USD profit would be taxed at the lower long-term capital gains rate instead.

What tax forms do you need to file?

Your employer will report your vested RSUs on your W-2 form along with your regular salary. The value of vested shares is already included in your annual income, so you don't need to report it separately.

If you sell your shares, you'll receive a Form 1099-B from your brokerage showing the sale. You'll use this form to report any capital gains or losses on Schedule D of your tax return.

Make sure to keep records of your vesting dates and the stock price on those dates because you'll need this information to calculate your cost basis when you sell shares.

FAQs

Do RSUs get taxed twice?

RSUs aren't taxed twice on the same income, but you do pay taxes at two different times. You pay ordinary income tax when the shares vest, based on their value at that moment. Later, if you sell the shares for more than they were worth at vesting, you pay capital gains tax only on the additional profit.

In other words, the IRS isn't taxing the same amount twice. It's taxing the original value once and any increase in value once.

How much tax will I pay on my RSU?

It depends on your income tax bracket and where you live.

At vesting, you'll pay your ordinary income tax rate on the value of the shares, which could range from 10% to 37% for federal taxes, plus state taxes if applicable.²

Your employer typically withholds around 22% for federal taxes by default, but this might not cover your full tax liability if you're in a higher bracket.¹

When you sell, any profit is subject to capital gains tax at either your ordinary rate (short-term) or preferential long-term rates.

Are RSUs taxed immediately?

No, RSUs aren't immediately taxed when you're first granted them.

Taxes come due when the shares vest and transfer to you. This could be months or years after you receive the grant, depending on your vesting schedule. Once vesting happens, your employer usually withholds taxes right away, so you won't get a surprise bill later for that portion.

However, you might owe additional taxes when you file your return if the withholding wasn't enough to cover your full liability.

RSU taxation can feel complicated, but the process becomes pretty straightforward when you research it well. The bottom line is, you're taxed when shares vest and again on any profit when you sell.

If you're thinking about moving your RSU proceeds abroad, make sure to use a money transfer service that doesn't charge hidden currency exchange rate markups.

For example, Wise.

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Sources

1. Nerdwallet - How RSUs Are Taxed—And 3 Tax-Savvy Steps to Take
2. IRS - Federal income tax rates and brackets

Sources checked 03/30/2026