Restricted Stock Unit (RSU)
A promise of company shares that converts into actual stock once vesting requirements are met — unlike an option, you don't pay anything to receive them.
Quick Answer
Do I owe taxes when my RSUs vest, even if I don't sell the shares?
Yes — RSU vesting itself is the taxable event, taxed as ordinary income at that day's fair market value, typically with a portion of shares automatically withheld and sold to cover the tax bill.
- Vesting, not selling, is what triggers RSU taxation
- Expect shares withheld automatically to cover taxes
- Any further gain after vesting is taxed separately as capital gains
The Lovie Advantage
Lovie distinguishes RSUs from options on every cap table entry, since the tax timing for each is fundamentally different.
See how this connects to Qualified Small Business Stock (QSBS). For the formal definition, see Investor.gov's glossary entry on dividends.
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