What High Earners Need to Know About RSU Taxes

Restricted stock units can build significant wealth—but without careful tax planning and diversification, they can create costly surprises.

RSUs can boost your wealth—but they also come with hidden tax risks. Natali _ Mis/Shutterstock

To retain top talent and encourage optimal performance, many companies are offering very generous employee compensation packages. And these could include restricted stock units (RSUs).

These could provide a great deal of value. But they can also leave you open to major risk, especially when it comes to taxes. So it’s crucial that you understand how RSUs work.

What Are RSUs?

RSUs are shares of company stock that are granted to certain employees. But they aren’t 100 percent yours until they’re fully vested. Vesting can happen after you’ve stayed with the company for a certain period of time or after meeting certain performance goals. But they typically have to do with time.