How are RSUs taxed?

RSUs are taxed in two moments, and almost everyone is surprised by the first one. Here's exactly when the tax lands, why your paycheck withholding usually isn't enough, and the capital-gains layer most people miss — without the jargon.

The two taxable moments

Moment	What's taxed	How
1. At vesting / settlement	The full value of the shares when they land	Ordinary income — like salary. Taxed whether or not you sell.
2. At sale	Any change in value since vesting	Capital gain or loss (short- or long-term by how long you held).

The key idea: at vesting you already paid income tax on that value, so it becomes your cost basis. Only the further move after that is a capital gain. (At a private company, double-trigger RSUs settle — and this income tax lands — only after a liquidity event; see double-trigger RSUs and the post-IPO playbook.)

Why the withholding usually isn't enough

When RSUs vest, your employer typically withholds some shares to cover tax — often at a flat supplemental rate that is lower than a high earner's actual marginal rate. The result: a gap you must make up with estimated tax or at filing. This is the number-one RSU surprise. Estimate yours with the free RSU withholding-gap calculator, and set the difference aside.

"Why do RSUs feel taxed so high?" — and the double-tax myth

Two things make RSUs feel brutal: the vest value stacks on top of your salary (pushing into higher brackets), and the withholding shortfall means a bill later. But RSUs are not taxed twice. The income tax at vesting sets your cost basis; at sale you're only taxed on the gain above that basis. People who report the sale without the correct basis accidentally pay twice — keep your vest-date values (see reading your RSU agreement).

Sell at vest, or hold?

Because you've already paid income tax at vesting, selling at vest is close to tax-neutral — there's little extra gain to trigger. Holding is a new, concentrated bet on your employer's stock. Most people sell at vest and diversify; weigh it with the concentration-risk calculator and the sell-or-hold framework.

Europe: treatment varies by country and instrument — start from the European equity guide and your national authority.

Frequently asked questions

When are RSUs taxed?

At two points: (1) when they vest/settle into shares, the full value is taxed as ordinary income (like salary), whether or not you sell; and (2) when you later sell, any change in value since vesting is a capital gain or loss. At private companies, double-trigger RSUs are taxed only after a liquidity event such as an IPO.

Why are my RSUs taxed so high?

Two reasons. The vest value stacks on top of your salary, often pushing you into higher brackets; and employers often withhold at a flat supplemental rate that's below your real marginal rate, leaving a gap you owe later. It feels high, but RSUs aren't taxed twice — the vest-date income tax becomes your cost basis.

Are RSUs taxed twice?

No — though a reporting mistake can make it look that way. You pay ordinary income tax on the value at vesting; that value becomes your cost basis. At sale you're taxed only on the gain above that basis. If you report the sale without the correct (vest-date) basis, you'd overpay — so keep your vesting records.

Should I sell RSUs as soon as they vest?

For most people, yes — selling at vest is close to tax-neutral (you've already paid income tax on that value) and avoids an over-concentrated bet on one stock. Holding is a separate investment decision. Model your concentration and tax before deciding rather than holding by default.

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