Question 1

How are restricted stock units (RSUs) taxed?

Accepted Answer

RSUs are taxed as ordinary income when they vest — not when they're granted. The fair market value of the shares on the vesting date is added to your W-2 income, subject to federal income tax, state income tax, Social Security, and Medicare taxes. Your employer typically withholds taxes by selling a portion of the vesting shares (sell-to-cover).

Question 2

What is RSU concentration risk?

Accepted Answer

Concentration risk occurs when a large percentage of your net worth is tied to a single company's stock — the same company that pays your salary. If the stock price drops significantly, you lose both investment value and potentially your job if the company is struggling. Financial advisors generally recommend keeping any single stock below 10-15% of your total portfolio.

Question 3

Should I sell RSUs immediately when they vest?

Accepted Answer

Many financial advisors recommend selling RSUs at vest and diversifying, because you've already been taxed on the full value as ordinary income at that point. Holding after vest is equivalent to buying that much company stock with after-tax dollars. The decision depends on your conviction about the stock, your existing concentration, and your overall financial plan.

RSU Calculator

Your RSU Grant

Total Gross Value

Total Net After Tax

Effective Tax Rate

Vesting Schedule: Gross vs Net

Concentration Risk by Year

Vesting Schedule Detail