Taxes Taxable Income What Are RSUs on Form W-2? By William Perez Updated on January 9, 2023 Reviewed by Ebony J. Howard Reviewed by Ebony J. Howard Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries. learn about our financial review board In This Article View All In This Article How RSUs Are Taxed RSUs and Withholding What To Know About Selling RSUs Frequently Asked Questions (FAQs) Photo: vitapix / Getty Images Definition Restricted stock units (RSUs) are company shares granted to employees, but with restrictions on ownership rights, usually tied to a vesting schedule. RSUs that appear on Form W-2 indicate that shares have been delivered to you, which usually happens after vesting. This is a taxable event with implications that can affect withholding from your paychecks and your tax liability when you file your tax return. Key Takeaways Restricted stock units (RSUs) are company shares granted to employees but with restrictions on ownership rights, usually tied to a vesting schedule.RSUs on Form W-2 indicate that shares have been delivered to you, which usually happens after vesting.Once transferred to the employee, RSUs are included as wages, and they are taxable at the fair market value of the stock.If your employer withholds too much or too little tax on your RSUs, you may need to submit a new Form W-4 to adjust. How RSUs Are Taxed RSUs are given to employees as part of their compensation. The shares are issued on a vesting schedule, meaning they aren't transferred to you until you've been with the employer for a certain amount of time or hit required performance milestones. Once transferred, the RSUs are taxable. The entire value of the stock is considered ordinary income after RSUs have been transferred. The fair market value of the stock at the time of distribution becomes part of the employee's wages for the year, and it's reported on their W-2 form at tax time. If you don't sell the shares right away, you'll later owe capital gains tax on the amount of any gain (the sale price minus the fair market price when you received the shares). If the share price has gone down, you'll be able to recognize a capital loss on the sale. RSUs and Withholding Your employer reports your income to you and to the IRS on your Form W-2. You'll receive copies providing you with the information you'll need to prepare your federal and state tax returns. RSUs are considered income for the tax year in which they're transferred to you. They're subject to withholding for federal and state income tax, Social Security and Medicare taxes, and any other payroll-related taxes. This can create problems that you should adjust for in your own estimated tax payments or on your Form W-4. A higher percentage of your pay is deducted for tax withholding and might result in your wages being over-withheld if your employer includes the restricted stock income with your regular pay for the pay period. However, your wages could be under-withheld if your employer includes the RSUs as a bonus or supplemental pay. Employers withhold at a flat rate of 22% on the first $1 million of supplemental wages paid out during the calendar year. Once supplemental wages for the year exceed $1 million, employers withhold at a flat rate of 37%. The 22% flat rate could result in too little being withheld for taxes, depending on your tax bracket. Note Consider submitting an amended Form W-4 to your employer to adjust your withholding if you think that your taxes are being over- or under-withheld. How To Read RSUs on Form W-2 The value of RSUs is typically recorded in Box 14 of the W-2, which is labeled "Other." Box 14 doesn't have a standard list of codes, thus allowing employers to enter any description they like. You might see the value of your vested stock followed by "RSU." Note RSUs are considered part of your wages, so they're also already included in Box 1 of your W-2, which reports your wages. Suppose you have $134,567 reported in Box 1 as wages and $12,345 reported in Box 14 labeled as RSUs. The $12,345 has been included already in the $134,567 amount, so you don't have to add the RSUs in Box 14 to your wages when you file your taxes. RSU's don't pay dividends until they vest. But a company might pay something equivalent to a dividend on unvested RSUs. These dividend-equivalent payments are considered employee income and are reported on your W-2. List them on your Schedule B with your tax return. What To Know About Selling RSUs You can either retain the stock or sell it after you're vested in your RSUs. You will need to keep records and use additional forms when reporting your income and filing your tax return. You must record your basis in the RSUs, which is the amount paid for the stock plus the amount included as taxable income. You had a basis of at least $12,345 in the example above because that's the amount reported on Form W-2. Calculate your gain or loss on the investment by subtracting the basis from the sale proceeds when the shares were sold. Report the sale by filing Schedule D and Form 8949. Frequently Asked Questions (FAQs) What is code RSU in Box 14 of my W-2? Box 14 of your W-2 lists "Other" forms of income. There's no standard list of codes for Box 14, so employers can choose how to describe the income here. If you see the letters "RSU" accompanied by a dollar amount, it's likely referring to the the value of restricted stock units (RSUs) that have been distributed to you by your employer during the tax year. Are RSUs taxed twice? There are two different types of taxes you may need to pay on RSUs, but RSUs are not subject to double taxation. The shares are taxed at the ordinary income rate when they vest and you own them. If you hold onto them, then you may also need to pay capital gains tax on any gain when you sell them. You're taxed once on the fair market value at the time of vesting and once on any gain you make, but not twice on the same amount. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "Equity (Stock) - Based Compensation Audit Techniques Guide." Fidelity. "About Restricted Stock Units." Schwab. "RSUs: Essential Facts." Internal Revenue Service. "Publication 15: Employer's Tax Guide," Page 20. Accessed Jan. 16, 2022. Internal Revenue Service. "Topic No. 409 Capital Gains and Losses." Accessed Jan. 16, 2022.