How Are Restricted Stock and RSUs Taxed?
Restricted stock and RSUs are taxed differently than other kinds of stock options, such as statutory or nonstatutory employee stock purchase plans (ESPPs). Those plans generally have tax consequences at the date of exercise or sale, whereas restricted stock usually becomes taxable upon the completion of the vesting schedule. Restricted stock plans are not eligible for capital gains treatment, and the entire amount of the vested stock must be counted as ordinary income in the year of vesting. (To learn more, check out Getting The Most Out of Employee Stock Options.) The amount that must be declared is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested. The difference must be reported by the shareholder as ordinary income. However, if the shareholder does not sell the stock at vesting and sells it at a later time, any difference between the sale price
