Ask an Advisor: How Are RSUs Taxed?
Key Takeaways
RSUs are taxed as ordinary income at the time they vest. When you sell the shares, you may owe capital gain taxes.
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8 min read
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investment
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July 28, 2025
03:35 PM
NerdWallet
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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
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
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
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
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