Are RSUs taxable income?
Shopify has a flexible compensation to allow you to choose how much salary/RSUs you get. I looked at the federal tax brackets and chose base pay to minimize my income tax at a reasonable salary. Looking back was that a dumb decision? Are RSUs just taxed the same as normal income in the US? I would have gone all cash if not for what I assumed would be higher income tax. TC: 300
Yes. RSUs are taxed as income at the time of vesting.
The RSUs you get are after tax AFAIK, so my guess is that was not a smart decision to get RSUs
Yes. Same as your income.
Yes it’s income and will show up on your W2 as income
RSUs are taxed as income. Normally when they they vest and before they are distributed to you, a portion is set aside and sold. The proceeds from that sale are used to cover the income tax. When filing your tax return you need to make sure to use an adjusted cost basis. If you fill out the data from the 1099-B you could end up paying unnecessary taxes on top of the taxes that were already paid. There will be some supplement to your 1099-B with the correct cost basis to use
🤦🏻♀️🤦🏻♀️ Okie RSUs are not a bad financial instrument. There a sweet point till the cash can make u a kind ultimately u'd start losing the money by sitting on it. Eventually u'd buy stocks and pay taxes on capital gains. So, it is pretty much the same thing
Yes. RSU timeline: - You are granted 1000 shares. You can disregard the share price your grant is based on for tax purposes. - You vest 250 shares. The share price at time of vest is $10, so you receive income of $2500. This is taxable. - The broker usually withholds a certain amount of shares to cover tax liability. For simplicity let’s say they withhold 20% of shares, i.e. 50 shares, i.e. $500 worth. - Let’s say your marginal tax bracket is 35% that year. You now have underwithheld 15% of the value, and will have to set it aside and pay it before January 15th of next year. So in this case, you will need to pay an additional $375 to the IRS - irrespective of if you hold or sell the rest of your vest. Now let’s consider two scenarios: - Price moves up by the time you sell. For simplicity, let’s say you sell at $20. - You set aside $375 as discussed above, but now have an additional tax liability on the value gain. Having sold 200 shares @ $20, your gross proceeds are $4000. This means you have received and additional $2000 in value. If this sale happened within one year of the vest, those gains are treated as income. So in total: $2000 * 0.35 + $375 = $700 + $375 = $1075. In total, you should earmark that amount for taxes, and you walk away with net proceeds of $4000 - $1075 = $2925. If the sale happened after one year, the difference is the tax rate applied to the $2000 gain — you are subject to capital gains tax which is significantly lower. Again, you would have still had to pay the $375 by January 15th of the year after the vesting event. Now let’s consider the other scenario: - Price moves down to $5 by the time you sell. - You still have to set aside the $375 you owe from the vest. - Your gross proceeds are 200 * $5 = $1000. - You have made a loss, $1000 < $2000 which was the value at time of vest. - You only owe the $375, and may be able to use this $1000 loss to offset other tax liabilities that year. - Your net proceeds are $1000 - $375 = $625. NTA/NFA
You might be wondering, can I lose money on RSUs? Yes you can. Following the above example, if the share price drops below the value you owe from underwithholding at the time of vest, you actually have to pay the IRS more than you receive in gross proceeds from the sale. In this case, if the price drops below ~$1.88, you receive less than $375 when you sell your 200 shares. You are now paying out of pocket because you did not, or were not able to, sell at the time of vest - and your broker did not withhold enough shares to cover your liability at vest. This is why the time between the vest and when you can sell introduces risk to the RSU recipient, and why companies generally try to align blackout dates so they do not overlap with vests.
Re. whether RSUs are worth it - it depends on: - Whether you receive more in RSUs than you would otherwise receive in cash, and if so how much more. - Whether you will be able to sell immediately, or as close to immediately as possible, on vest. If the ratio of cash:RSU is 1:1 or close to that, they are not worth it — consider that you could always buy company stock using the cash instead, if you believe there’s upside. (Personally, I wouldn’t — my employment is already tied to the company and so owning shares on top just adds risk. I also sell vests as soon as I’m able to for the same reason). If blackout dates coincide with vests, this also significantly increases the risk of RSU vs cash. So overall, there’s a premium on cash — personally, I’d have to receive 20-50% more to consider trading them for cash and taking on the additional risk.
It’s income. Why wouldn’t it
Fuckkkk thank you. I was thinking it was capital gains tax - stupid decision on my part. Luckily I can change my decision every quarter
Capital gains tax will apply on the difference in the price you get the RSU at and the price you sell