Managing Your Equity-Based Compensation With Restricted Stock Units (RSUs)

With stock markets fluctuating wildly, it’s especially important to understand the financial and tax implications of any company stocks your employer might offer. Restricted stock units, or RSUs, have become particularly popular in recent years. A 2017 survey by Ayco’s Compensation and Benefits group showed 72% of companies use RSUs, up from 37% just 10 years earlier.

So, how do RSUs work? They’re a type of equity-based compensation in which there is a period between when you’re granted shares of company stock and when you actually gain ownership (vesting) in those shares. RSU vesting is often contingent on a minimum tenure with the company, and the actual value depends on the market price of your company shares at the time they vest rather than when the RSUs are granted.

RSU tax treatment is relatively straightforward. You don’t owe any taxes until they vest — since the shares are not technically yours until then. In the year in which they vest, the value of the shares is considered ordinary income and is taxed as though you had received the same amount in cash. If you decide to hold onto the shares, any change in value is taxed as capital gains or losses when you sell the shares.

Read the full article at Equities.com.