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Wouldn't you pay income tax on the RSUs based on the notional initial value, and only pay tax on the options if you exercised them?
by jameslevy 6y ago
Wouldn't you pay income tax on the RSUs based on the notional initial value, and only pay tax on the options if you exercised them?
- sokoloff 6y ago(Under US law,) You pay income tax on RSUs only when they are both vested and released. (These typically happen on the same day, but in the future, not on the grant date.)
- philwelch 6y agoNot really. RSU’s don’t have a “notional initial value” for public companies; if you get them, you pay tax on the number of RSU’s you got times the stock price at the time you get them. Your vesting schedule will just say, “X units of ABC on 5/1/20” with no dollar figure. Brokerages will typically set things up so you can automatically sell enough shares to cover your tax liability as soon as they vest. Typically you have to amend your cost basis on your tax return for this to actually work, for some stupid bureaucratic reason. Probably a conspiracy to make people who get equity compensation buy the more expensive version of TurboTax.
- PNWChris 6y agoAt my employer they withhold taxes from the RSUs themselves as they vest (taxes are withheld at the bonus tax rate using integer multiplication, I believe). E.g.: you'll get Math.floor(x * (1-bonus_tax_rate)) shares and will owe no income tax (unless your marginal tax rate is over the bonus tax rate). After that point, you'll only owe taxes on possible capital gains from price at the time of vest to the time you sell.