Restricted stock: RSUs and RSAs
RSUs: What are they?
RSUs: What are they?
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Restricted Stock Units:
What are they?
An animated skyline appears before isolating to a single tower. Text appears next to the tower.
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An RSU grant is a promise from an employer to award employees with shares of the company's stock…
Narrator [off-screen]: An RSU grant is a promise from an employer to award employees with shares of the company's stock…
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And a way to share in the company's potential financial success.
Narrator: …and a way to share in your company's potential financial success. Your company distributes RSUs to employees…
The skyline diminishes into a circle, and three other circles emerge from the skyline, each containing a different person.
Narrator: …determines the number they receive, and sets the vesting schedule.
A circle containing certificates and a circle showing a calendar replace those with the skyline and people.
Narrator: Over time, RSUs convert to stock shares.
The certificates disappear, leaving only the calendar. A line graph emerges from the calendar showing how the amount vested increases by 25% each year following the date the grant is received.
Narrator: Vesting is the time it takes for your grant to turn into shares. On the vesting date, they become yours.
At year 4 and 100% vested, a laptop appears surrounded by erupting fireworks.
Narrator: In order to accept a grant, you need to open a Schwab brokerage account—or link your existing brokerage account.
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To accept a grant, open a Schwab brokerage account.
A laptop displaying the Equity Awards Center webpage.
Narrator: From here, you can review grant details and accept the award.
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Review grant details and accept award.
The webpage changes to display different available grants.
Narrator: Since vesting may be a taxable event, your company may sell or withhold a portion of your vested shares to cover your tax obligation. Your net shares will be deposited into your Schwab brokerage account.
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Net shares will be deposited into your account.
The webpage scrolls down to show the current equity diversity and vested shares for the example client. A blue box emerges with the text “Taxation can be complex. We encourage you to reach out to your tax advisor for guidance.”
Narrator: Still have questions? Give us a call.
Onscreen text:
Still have questions?
To talk to a Schwab Stock Plan Specialist, call 800-654-2593.
International participants, call +1-602-355-3408.
Narrator: Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.
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Or from your Schwab account, navigate to Equity Awards and click on Knowledge Center.
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Own your tomorrow®
FOR GENERAL INFORMATIONAL PURPOSES ONLY.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, legal advisor, or investment manager.
Schwab Stock Plan Services provides equity compensation plan services and other financial services to corporations and executives through Charles Schwab & Co., Inc. ("Schwab"). Schwab, a registered broker-dealer, offers brokerage and custody services to its customers.
©2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CC4011786 (1120-0V87)
RSUs
Companies can compensate you in the form of restricted stock units (RSUs) or restricted stock awards (RSAs). These are "restricted" because there are conditions that must be met (such as length of employment or performance goals) before the shares vest. Upon vesting (or delivery for RSUs), the ownership of the shares shifts to you, and they're deposited into your account.
How restricted stock is taxed
Taxes come into play twice: first, when the shares are delivered to you, which is typically when they vest, and then again when you sell them.
RSUs: How you are taxed
RSUs: How you are taxed
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Restricted Stock Units: How You Are Taxed
Narrator [off-screen]: An RSU, or restricted stock unit, is a promise from an employer to award employees with shares of the company's stock…
A building made of puzzle pieces is assembled by an animated man and woman, each holding a puzzle piece.
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An RSU grant is a promise from an employer to award employees with shares of the company's stock.
Narrator [off-screen]: …and a way to share in your company's potential financial success.
The man and woman each place their pieces of the puzzle on the building. A yellow halo effect surrounds the building once it is complete, and a flagpole with a money sign on the flag appears at the top of the building.
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And a way to share in your company's financial success.
Narrator [off-screen]: RSUs have value once they vest, so it's important to know what to expect when it comes to taxes.
The camera pans down the screen where a diagram animates in. A red circle with "RSU Grant" and an icon of a certificate is in the center. A line emerges from the icon and moves down to form the next layer of the diagram. Blue circles with "Grant," "Vest," and "Sale" appear.
Narrator [off-screen]: The lifecycle of an RSU grant can be broken into three parts: grant, vest, and sale.
From the Grant circle, a line animates down toward a box.
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Stage 1
Receive RSU Grant
Not a taxable event
Narrator [off-screen]: The first stage, receiving your RSU grant, is not typically taxed, so you don't need to worry about taxes at this time.
A line extends from beneath that box down toward a second box. In that box, certificate icons animate in and turn into dollar bills.
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Stage 2
RSU Vests
Taxable event
Narrator [off-screen]: The next stage is when your RSUs vest. This is a taxable event because RSUs turn into company stock upon vesting and that stock is worth money and is considered compensation.
An arrow emerges from the right side and points toward a grey box with a dollar sign inside.
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Taxes paid will be based on the Fair Market Value
Narrator [off-screen]: You'll need to pay income taxes on this compensation. This will be based on the fair market value of the stock on the vesting date. You'll see this income and taxes paid for that year on your W2 or relevant tax statement.
The dollar sign rotates to become an icon of a stack of paperwork.
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Income and taxes paid will appear on your W2
The arrow continues toward a spinning globe. The globe rotates and reveals an illustration of a city skyline. Two lines extend down at an angle from the skyline. One line leads to a circle that has certificate icons; the other leads to a circle with dollar icons. A blue box animates in from the upper right corner.
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Shares set aside by company
Covers tax responsibility
Be sure to check with your company and tax advisor for guidance related to your situation.
Narrator [off-screen]: Depending on what country you're in, your company may be required to withhold taxes at the time of vest, meaning they would set aside the minimum amount of shares to cover your taxes. You could owe more depending on your individual situation.
A line draws out from the right and moves across the screen towards an illustration of a computer. A search bar on an animated dashboard pops up, followed by a red bar on the screen that says "Vested." A line draws down from the screen and creates another decision tree featuring two circles. On the left the circle says "Hold" and on the right it says "Sell."
Narrator [off-screen]: You can find your tax statements in the Equity Awards Center. Once your shares vest, it's your choice whether you hold onto them or sell them. If you decide to sell, you may have additional taxes.
A line draws down from the "Sell" circle a creates a graph over time. The x-axis along the bottom is marked by "Vesting Date" and "Sell Date." A red line shows a downward trend over time. On the y-axis the graph ends beneath the line. A blue box appears in the upper right-hand corner.
Narrator [off-screen]: If the stock is sold at a price that's lower than the value on the vesting date, this means the shares went down in value, and you would realize what is called a capital loss.
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Tax loss harvesting can be complicated and you may want help from a tax professional.
The red line deletes and redraws along the axis in a positive trend over time.
If the value goes up, the difference between the Fair Market Value of the stock when you sell, and the Fair Market Value of the shares vested will be your profit. That is what you'll need to pay additional taxes on.
An arrow emerges from the graph and points toward a box.
Narrator [off-screen]: Taxes you pay when you sell are called capital gains taxes. How much you pay will depend on the amount of time that passed between the day they vested and the day you sell.
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Capital Gains:
Taxes you pay if the value of shares went up when you sell.
A line draws out and up toward a box with a calendar icon.
Narrator [off-screen]: There are two types of capital gains taxes. Short-term capital gains taxes are when you're selling shares and it's been less than one year since they vested and became yours. They're taxed at the same rate as your ordinary income.
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Short Term:
Less than 1 year since vesting
A line draws down from the box towards another box. This box features a calendar icon. A blue box appears in the upper left-hand corner.
Narrator [off-screen]: But, if you wait for longer than one year, you'll pay long-term capital gains taxes.
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Long Term:
Greater than 1 year since vesting
Be sure to check with your tax advisor for rates based on your location.
The calendar icon animates into a calendar with a check box.
Narrator [off-screen]: They tend to be at a better rate, so you'll keep more of the money you make from your sale.
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Long Term:
Taxed at a better rate
A line emerges to the right. A red dot appears on that line, and above that line a circle animates in with an icon of a certificate inside. The line continues to draw out. A new red dot appears, and the circle with the certificate follows it down the line.
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There are some advantages to holding onto your shares.
The line trends downward to create a new dot. The circle with the certificate follows. Then the line moves upward, levels off, and then trends down again. Red dots mark the turning points.
Narrator [off-screen]: So waiting for more than a year to sell your shares may have its benefits because you may pay less in taxes. But it's important to remember that there are trade-offs to holding.
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However, holding can open you up to more risk.
Narrator [off-screen]: The longer you keep your shares, the more market risk you open yourself to with the possibility that the stock could decrease over time.
The line ends at a red dot, and the circle with the certificate stops above the red dot.
Onscreen text: There's always the possibility that the stock could decrease over time.
The certificate and text on screen animate away, and a signpost animates in from the red dot. The sign features an arrow pointing left.
Narrator [off-screen]: If you have any specific tax questions, be sure to chat with your financial advisor.
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Questions? Consult with your financial advisor.
A blue bar sweeps across the screen as the screen turns white.
Narrator [off-screen]: Still have questions? Give us a call.
Onscreen text:
Still have questions?
To talk to a Schwab Stock Plan Specialist, call 800-654-2593.
International Participants, call +1-602-355-3408.
Narrator [off-screen]: Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.
Onscreen text:
Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.
The Charles Schwab logo appears. Schwab brand music plays.
Onscreen text:
Own your tomorrow®
FOR GENERAL INFORMATIONAL PURPOSES ONLY.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, legal advisor, or investment manager.
Schwab Stock Plan Services provides equity compensation plan services and other financial services to corporations and executives through Charles Schwab & Co., Inc. ("Schwab"). Schwab, a registered broker-dealer, offers brokerage and custody services to its customers.
Ó2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CC4011786 (1221-12LD)
RSUs
Taxes upon delivery
You will pay ordinary income tax on the fair market value of the stock, which is determined by your company and typically based on the market price of the stock upon delivery.
Taxes upon selling
When you sell your shares, you will incur a capital gain or loss, depending on whether the value of the stock increased or decreased. If you had a gain, you will be subject to capital gains tax.
If you sell your shares within one year of receiving your shares, they are subject to short-term capital gains and will be taxed at your income tax rate. If you sell your shares more than one year after you receive them, they're subject to long-term capital gains and will typically be taxed at a lower rate.
Be sure to meet with a tax professional to discuss your specific situation.
RSAs
The tax rules are similar for RSAs, with one potential tax benefit. RSAs let you take advantage of the 83(b) election, which allows you to report the stock award as ordinary income in the year it's granted rather than the year it vests. This is advantageous if you anticipate making significantly more income and falling into a higher tax bracket in the future. Note: You need to make the election within 30 days of the grant.
Note: This section refers to U.S. taxation. International tax filers may have different obligations. Learn how taxation works in your country with our Global Tax Guide, which you can access while logged in to the Equity Award Center.
RSUs: Selling your shares
RSUs: Selling your shares
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A blue bar scrolls up and the title appears.
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Restricted Stock Units:
Selling Your Shares
The blue bar sweeps to the right. When it sweeps back to the left, it reveals the image of a laptop computer. The laptop screen displays a Schwab login page on which a user name and asterisked password are entered.
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Find Your Shares
Log into your account at schwab.com.
Female narrator: To find your shares, log in to your Equity Award Center account by going to Schwab.com.
Tempo of music increases.
The blue bar sweeps right and then left to reveal new copy. The laptop screen now displays an Equity Awards page, which scrolls down to highlight the number of shares owned.
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Find Your Shares
Click Accounts tab, then Equity Awards subtab.
Narrator: Click the Accounts tab, and then the Equity Awards subtab, where you'll see the number of shares you own.
The blue bar sweeps right and then left to reveal new copy. The laptop screen displays a Stocks & ETFs page.
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Sell Your Shares
Click Trade tab, then Stocks & ETFs subtab.
Narrator: When you're ready to sell, click the Trade tab and then the Stocks & ETFs subtab.
The blue bar sweeps right and then left to reveal new copy. On the laptop screen, a trading window opens, and the information mentioned by the narrator is filled in.
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Sell Your Shares
Enter company ticker symbol. sell action and quantity.
Narrator: Enter your company's ticker symbol, select the Sell action, and then enter the quantity of shares you want to sell.
The blue bar sweeps right and then left to reveal new copy. On the trading window shown on the laptop screen, information appears that explains what a limit order and a market order are.
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Sell Your Shares
Select order type.
Narrator: Next, designate an order type. If you don't choose the Market Order, you'll need to choose the timing of the order instead.
The blue bar sweeps right and then left to reveal new copy.
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Sell Your Shares
Or select timing.
The blue bar sweeps right and then left to reveal new copy. On the trading window shown on the laptop screen, information about the order is displayed.
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Sell Your Shares
Click Review Order.
Narrator: Click Review Order to verify that everything is correct.
The blue bar sweeps right and then left to reveal new copy. On the trading window shown on the laptop screen, the Place Order button is selected.
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Sell Your Shares
Click Place Order.
Narrator: If it looks good, click Place Order.
The blue bar sweeps right and then left to reveal new copy. On the trading window shown on the laptop screen, the Order Received information is shown, and the order number is highlighted.
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Finalize Sale
Find your order number.
Narrator: After it's finalized, you'll receive an order number.
The blue bar sweeps right and then left to reveal new copy. The laptop screen now displays the Accounts page, on which account balance information is shown.
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Finalize Sale
Click Accounts tab to view cash deposit.
Narrator: Once the cash is deposited into your account, it will appear in the Accounts tab within three business days of the trade.
The blue bar sweeps right and then left to reveal new copy.
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Still have questions?
To talk to a Schwab Stock Plan Specialist, call 800-654-2593.
International Participants, call +1-602-355-3408.
Narrator: Still have questions? Give us a call…
Tempo of music slows, and gentle music again plays.
The blue bar sweeps right and then left to reveal new copy.
Onscreen text:
Still have questions?
Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.
Music stops.
Narrator: Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.
Brand music plays.
The blue bar sweeps right and then left to reveal new copy.
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Charles Schwab logo
Own your tomorrow®
For general informational purposes only.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
Stock Plan Services provides equity compensation plan services and other financial services to corporations and executives through Charles Schwab & Co., Inc. ("Schwab"). Schwab, a registered broker-dealer, offers brokerage and custody services to its customers.
©2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CC4011786 (1120-0V87)
How to sell your shares
Here's step-by-step guidance on how to sell your shares. Prior to selling any shares, you'll want to carefully consider the tax consequences and your personal financial situation. For advice, consult a tax advisor or a financial consultant.
Cost basis and tax forms
When filing your taxes, it's important to be mindful of the cost basis you report. Cost basis is the fair market value your company assigned to the shares at vesting. Using the correct cost basis ensures that you file correctly and aren't taxed more than the required amount. Refer to this cost basis sheet to help you determine the cost basis on your stock plan transactions so you can file your taxes accurately.
Tax Forms
You will receive IRS Form 1099-B (U.S. only).
Common questions about restricted stock
What is a vesting schedule?
Vesting schedules are often time-based, requiring you to work at the company for a certain period before vesting can occur. Here's an example of how vesting might work: You are granted 500 RSUs. Your vesting schedule spans four years, and 25% of the grant vests each year. At the first anniversary of your grant date—and on the same date over the subsequent three years—125 shares vest.
How does an RSU become a share?
After vesting, companies release shares of common stock to the employee. Once this happens, you can hold or sell the shares just like you can with any other kind of stock.
What's the difference between an RSU and an RSA?
With RSAs, you may have voting and dividend rights because your employer sets aside actual shares upon the grant. RSUs, on the other hand, are more like a promise to pay out shares or their equivalent value in cash. No shares are set aside upon the grant, so you don't have the same rights to voting or dividends as with a restricted stock award, but some do allow a dividend equivalent paid in cash.
How do I view my restricted stock?
You'll need to log in to your Schwab One® brokerage account and choose "Equity Awards" from the navigation bar on the Accounts page to view your award details.
What happens to my restricted stock when I leave the company?
If you leave your company, vesting may stop and you may forfeit any unvested shares. You should review your grant agreements or consult with your former employer regarding terms and conditions on vested and unvested equity awards.
Have more questions about your restricted stock? We're available 24 hours a day, Monday through Friday.
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Call 800-654-2593.If outside the U.S.,
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Log in to your account.Head to the Equity Awards tab, and select the chat icon to be connected directly to a Stock Plan Services Specialist.
Or visit Videos and Forms for more information.