Is 10k rsu award same as 10k in salary? Ignoring appreciation and depreciation. Selling immediately in the same year?
Tc 225k
In terms of compensation, $10K in RSU that vests in 2019 is subject to withholding, so you may only get ~50% of the actual value of vested shares issued to your employee brokerage account; the balance is reported as withholding for various taxes (just as if you had received a large one-time bonus as compensation). In April next year when you file Tax Year 2019 taxes, your employer’s W-2 form will show all your compensation (including salary + bonus + RSU etc) as well as all your tax withholding (including recurring paycheck withholding as well as RSU withholding). If you sell immediately, you only have additional short-term cap gains tax on any potential appreciation after vesting date.
The tax withholding amount is higher than that of equivalent salary? When filing taxes on April next year, will you get the extra taxes back?
The withholding will likely be at your highest marginal tax rate (since the RSUs count as supplemental income, like a bonus). However, some companies may only withhold at your W4 rate (same as salary). If the former is true, you may get some money back. In general, RSUs are not treated any differently from a W2 perspective. You'll see one number which is salary + bonus + rsus vested that year, and that's what you owe tax on. Depending on the tax schemes for that year, and how many exemptions you put down on your W4, your withholdings will either be more or less than the taxes you owe, which determines if you get money or owe money.
And... You're not taxed more if you sell right away, You're Just taxed as regular income on any gains you make that are short term. On the other hand you can have lower taxes if you hold them for a longer period of time (long term capital gains). I.e. short-term capital gain = income (taxed the same, unless it just coincidentally happens to push up into a higher tax bracket) Long-term capital gains = potentially taxed less than normal income
With the salary if one buys stock and hold it longer it will be the same right?
Imagine you have $10k of stock vest, and the company withholds $4k of that. That leaves you with $6k worth of stock. If you sell immediately, that's just like if you had $10k paycheck that got $4k withheld. So you're right, if you keep your RSUs it's effectively the same as getting paid $10k cash and choosing to buy company stock with the post-tax $6k. But the most compelling reason to sell RSUs is that you're already overexposed to your company's stock. Assuming you have a good pipeline of RSUs, selling immediately reduces your risk. If you sold and the stock goes down, great. If you sold and the stock goes up, don't kick yourself, your future RSUs are worth a lot now, just keep working there. If you didn't sell and the stock goes up, you get a little more upside. If you didn't sell and the stock goes down, there goes your hard-earned cash :/
Salary is recurring, and will be there in future years. Also, many benefits (401k, espp, etc) are a percentage of base salary, so salary is multiplicative. On the other hand, RSUs can grow or fall with the market.
If your company has good refreshers, then you get dollar-cost averaging benefits. Years when stock tumbles, you get grants of more shares, which grow more as the stock rises. So at those companies, RSUs really are almost as good as cash.
Note that I said almost as good, because the 401k, espp etc are good deductions (although most of them have dollar limits you pass before the % limits if you're SWE)
When the economy and/or company businesses goes south, bonuses and RSUs tend to disappear. Salary will be paid as long as you have the job. This has not happened much in the last 10 years, but it won’t be long...
Whats wrong with people here... I made a comment about what happens to RSUs when one dies and that got flagged???? It’s a clause that appears in your RSU contract. Jeez... what’s wrong with blind these days. I get it when you flag hate speech, etc. But this is weird. Plus it was adding to OP’s question in terms of what’s preferable between beefing up base or beefing up RSUs.
For tax purposes, yes. They count as short term gains.
For most people at a publicly traded company, cash is going to preferable to the stock, as your income is likely all tied to that company's health.
Lots of comments are partially accurate. OP the only difference is schedule of payment. 10k salary is paid over 24 paychecks. 10k RSU may be split into 2 awards every 6 months. And obviously the RSU can go up or down. Taxes paid are the same.
Yep. At Google specifically, if the marginal increase of your grant size by $10k per year pushes it over the threshold to vest monthly, it would be preferable to the salary increase, but generally for the salary as cash because the tax rate owed for both are the same... Ordinary income
No, not unless vesting amount is split evenly every year, even then 10k salary is preferred cuz you are taxed more if you sell your 10k vest immediately
You are taxed the same for salary vs rsu vests. I’d still prefer salary since it’s easier though (assuming no appreciation or depreciation as posed in the original post).
Why taxed more in the case of rsu?