Should I keep or sell my RSUs when they vest?

Given that RSUs are taxed as ordinary income and there is no tax benefit for holding them, I recommend you sell as soon as you vest and use the proceeds to fund your other financial goals.

What happens when I sell my RSUs?

When you sell the shares, you will pay capital gains tax on any appreciation of the market value from the vesting date when you received the RSU shares. If you sell the shares immediately, before they increase or decrease in value, there will be no capital gains tax due.

What happens when RSUs vest?

The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares is withheld to pay income taxes. The employee receives the remaining shares and can sell them at their discretion.

Do you have to sell RSU when leaving company?

Generally, leaving the company before the vesting date of restricted stock or RSUs causes the forfeiture of shares that have not vested. Exceptions can occur, depending on the terms of your employment agreement.

What happens to my RSU when I sell it?

Remaining cash is given to the recipient. While nothing can be done to avoid this inevitable tax on the RSU’s, the good news is the shares are now 100% yours. The last tax consideration to be aware of now that you own the stock is what happens when you sell it.

How is an RSU different from a stock option?

An RSU is not stock, nor is it a stock option. Rather, RSUs are a form of compensation that employers make to their employees in order to give them shares of unvested stock that at a later date upon vesting works as a form of employee compensation. RSUs typically vest after certain requirements have been met or a certain amount of time has passed.

Is there a special holding period for RSU shares?

Unlike with incentive stock option (ISO) or employee stock purchase plan (ESPP) shares, there is no special holding period rule that can reduce your tax bill for RSU shares. If you do hold the shares, then they will be taxed exactly as if you had purchased them on the open market on the day they vested.

Do you have to sell RSUs to diversify your portfolio?

Diversification is not a process that has to happen all at once. While investors can sell all of their RSUs and build a completely new portfolio, they could also slowly sell and reinvest. This wait-and-see approach may allow investors to keep a close eye on the value of their company stocks.