Definition
Company stock promised to an employee that turns into actual shares on a vesting schedule. At each vest, the shares' market value is taxed as ordinary income like a cash bonus; any later gain or loss from that point is a capital gain or loss.
Why it matters
RSUs concentrate pay, wealth, and job security in one company, and the default tax withholding at vest is often too low for higher earners, creating surprise bills at filing. Whether to hold or sell vested shares is really a question of how much single-stock risk to carry.
Example
An employee vests 200 shares at $50: $10,000 of ordinary income lands on their W-2. They sell a year later at $65, and the extra $3,000 above the $50-per-share cost basis is taxed as a long-term capital gain.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.