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Comment by pavlov | Hacker News Reader

RSUs (Restricted Stock Units) are taxed as income when they vest.

Typically shares are withheld to pay the tax before you ever see them. I.e. if your tax rate is 50% and you're getting an award of 100 shares, you'll only receive 50 shares in your account.

After that the shares are treated as if you'd purchased them at market rate. If you sell them immediately, there's no capital gain and no further tax to pay.

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Where do the other 50 shares go? Is the government holding billions of dollars worth of shares in private companies? Or do they immediately put them on the market? Seems like that might distort the price.

Presumably this structure means the company pays the tax to the government, and are, in essence, buying back their own shares :)

It's called "sell to cover": All the shares vest, then a number of them are automatically sold on the open market and the proceeds are withheld to cover the income tax liability.

It's often possible to choose between doing that or keeping all the shares and paying the tax liability out of your salary.

But presumably they vest at a lower price - also do you have taper relief?

By taper relief I mean you sell older shares first and get taxed on long term capital gains first in first out.

RSUs are stock awards. The vesting price to the employee is zero, and so each vesting tranche is treated as income on the day of the vest.

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