What the data shows is If you recently started earning restricted stock units (RSUs), you may be wondering what this means for you — and for your taxes.
RSU taxes aren’t overly complicated, but the boost to your compensation may be enough to require you to re-evaluate other aspects of your financial life, from your income tax withholding to your retirement savings strategy, says Ross Anderson, a certified financial planner and co-founder of Craftwork Capital in Alexandria, Virginia.
To understand the ripple effects of equity compensation, let’s start with the RSU tax basics. » New to this. Learn how RSUs work. Nevertheless, How are RSUs taxed.
RSUs are taxed as ordinary income at the time they vest (remarkable data), amid market uncertainty.
Furthermore, When you sell the s, you may owe capital gain taxes, depending on whether you earned a fit on the sale, as well as other factors. How are RSUs taxed when granted.
Nevertheless, You ly were granted RSUs as part of a compensation package when you were offered a job, or perhaps alongside a motion or raise.
At this point, your RSUs are a mise to issue stock at a later date, but whether you actually see those s depends on meeting certain conditions[0]IRS.
Meanwhile, Equity (stock)-based compensation audit nique guide. View all sources. Moreover, That often means waiting until the s vest over a period of years.
Because you nically don’t own the stock during this period, you don’t owe any taxes yet, in this volatile climate. At the same time, How are RSUs taxed when vested.
When your RSUs vest, ownership transfers to you, and as far as the IRS is concerned, that makes them income[0]IRS (an important development).
However, However, Taxation of stock-based compensation received by nonresident aliens - YouTube text script. View all sources.
Furthermore, On the other hand, At this point, how much you owe on vested s depends on their value, which is based on how many s you received and their market value on the vest date.
RSUs are taxed at your marginal income tax rate (the same as your other wages), and your employer must withhold the required taxes.
Your company may withhold stock to cover your taxes or you may be required to sell s. At the same time, Paying taxes out-of-pocket also may be an option (something worth watching).
In contrast, 🤓Nerdy TipHow withholding happens upon vesting depends on elections you make with your company at the time RSUs are granted.
Additionally, At the same time, “What most people do is choose to have s withheld for taxing the s as they vest,” Anderson says, in today's market environment.
However, “Choosing to pay the taxes yourself, you’d have to be really bullish on the company. Furthermore, ”How are RSUs taxed when sold (fascinating analysis).
When you sell your RSUs, you may owe capital gains tax if you earned a fit on the sale (something worth watching).
At this point, the actual tax rate depends in part on how long you held the stock, considering recent developments. On the other hand, Less than a year.
Short-term capital gains are treated as ordinary income. Moreover, More than a year.
Nevertheless, Long-term capital gains are generally taxed at a lower rate, up to 20%, depending on your household income, given current economic conditions. Moreover, How much are RSUs taxed.
Consider the ing scenario: You are granted 1,200 RSUs at the time you join a company, given the current landscape.
On the other hand, Nevertheless, The vesting schedule dictates that 25% of the s will vest per year over four years. However, On your one-year anniversary, 25% of the s vest, transferring 300 s to you.
The stock is worth $10 per on the vesting date. When you decide to sell your s, their value has increased to $12 per.
On the other hand, For this example, let’s say your single household income is less than $533,400 in 2025, which means the applicable long-term capital gains tax is 15%, amid market uncertainty.
Here’s generally how much your s would be taxed, given current economic conditions. What's taxedTax rateWhen they’re grantedNothing. The s are mised but haven’t yet transferred to you.
Furthermore, Not applicable. When they’re vestedThe value of the vested s (an important development). Value: 300 s x $10 = $3,000Marginal tax rate.
22% tax bracket: $3,000 x 22% = $660When they’re soldThe capital gain, or fit. Ceeds: 300 s x $12 = $3,600Capital gain: $3,600 - $3,000 = $600Capital gains tax rate.
Short-term: $600 x 22% = $132 Long-term: $600 x 15% = $90RSU taxes: Important considerationsPeople getting RSUs or other equity compensation for the first time can be surprised at the way it changes their financial picture, says Anderson with Craftwork Capital.
On the other hand, Taxes can play a big role in that because, according to Uncle Sam, your earnings may have gone up dramatically even if the size of your paycheck didn’t change.
On the other hand, But the impact also may go beyond taxes to “open new doors you didn’t know were open,” Anderson says, in today's financial world.
Moreover, He suggests taking an equity grant as an opportunity to assess your new financial picture (something worth watching). Here are three ways to do that.
Looking for a financial advisor (noteworthy indeed). Here’s how to find one near you or online. Furthermore, Check your withholdingWhen your RSUs vest, they’re considered supplemental income.
In contrast, The IRS sets the default tax withholding rate at 22%[0]IRS (an important development). Nevertheless, Publication 15 (2025), (Circular E), Employer's Tax Guide. View all sources.
(It’s 37% if all your supplemental income adds up to more than $1 million in a year. ) But just because it’s the default rate doesn’t mean it’s the right rate for you (noteworthy indeed).
However, Conversely, One common blem people run into with RSUs is that their withholding was too low, Anderson says (fascinating analysis).
“Twenty-two is a good guess,” Anderson says, “But that’s where people get in trouble if they’re just guessing and they don’t actually know what their tax bracket is going to be (an important development), in this volatile climate.
”How much you owe in federal income taxes depends on your household income and other factors.
Furthermore, If you’re married and your spouse also earns a paycheck, it’s a good idea to review your withholding together.
The evidence shows IRS’ tax withholding estimator can help you determine if you should change your withholding, considering recent developments.
Revisit your retirement savings strategyIf the value of your RSUs is enough to bump you into a new tax bracket, it could be prudent to take another look at the types of tax-advantaged accounts you’re using to for retirement.
Conversely, Often, young earners prioritize saving in a Roth 401(k) or Roth IRA because they’re in a lower tax bracket than they expect to be in during retirement, when they’ll be able to withdraw those funds tax-free.
If that’s been the case for you, but RSUs change your situation, it might be time to send more of your pre-tax dollars to retirement savings with a 401(k) or traditional IRA, Anderson says.
Furthermore, Consider your selling strategyBecause RSUs typically vest in batches, you may find yourself holding on to more s in a single company than you expected or want, in light of current trends.
Having so much of your investments in one place is considered a higher risk.
Furthermore, If the company you work for is super-successful, and you’re financially stable, you may decide it’s worth the risk to hold onto as many s as you can, Anderson says.
On the other hand, But it’s also reasonable — and often prudent — to reduce that risk by selling stock even when it means paying higher taxes (an important development).
As you consider your RSUs selling strategy, Anderson offers three questions to ask:What do you believe the company.
Furthermore, Even if you don’t need the money you’d get by selling RSUs, if you have a negative view of the company, you should reduce the amount of stock you own. However, Do you need the money.
If you have other goals, such as buying a, saving for college, or retiring early, you may opt to sell s to redirect the money to those other savings buckets (which is quite significant).
What are the tax considerations. On the other hand, Anderson intentionally places this question third. “I try not to do anything exclusively for tax purposes,” he says.
On the other hand, But it’s still valuable to assess the tax-related impact of selling to see if you can be strategic in reducing your tax liability.
The authorTaryn PhaneufTaryn Phaneuf is a lead writer and content strategist covering wealth management, financial planning and other topics, in this volatile climate.
She previously covered personal finance news, given current economic conditions. Taryn joined NerdWallet in 2022 after reporting on, education and public policy for more than a decade. See full bio.