Restricted Stock Unit (RSU)
A form of employer equity compensation that delivers shares (or cash equivalent) to an employee upon vesting, taxed as ordinary income at vesting.
Detailed Explanation
RSUs are taxed at vesting based on the fair market value of the shares delivered, reported as ordinary wages on the W-2 with federal income, FICA, and Medicare withheld at supplemental rates. Subsequent sale of vested shares creates a capital gain or loss measured against the basis (vesting-date FMV). High earners commonly face under-withholding because employers often withhold at a flat 22% federal rate, which may be below the marginal rate. Tax planning around RSU vesting includes 83(b)-style elections (rare for RSUs), tax-loss harvesting, and quarterly estimated payments.
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Learn about Tax Planning & StrategyRelated Terms
Alternative Minimum Tax (AMT)
A parallel federal tax system that ensures high-income taxpayers pay a minimum amount of tax by limiting certain deductions and preferential treatments.
Capital Gain
The profit realized from the sale of a capital asset such as stock, real estate, or cryptocurrency, taxed at preferential rates if held longer than one year.
Estimated Tax
Quarterly tax payments made by self-employed individuals, investors, and others whose income is not subject to sufficient withholding.
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