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Here's an example. Say you've been granted 1,500 RSUs and the vesting schedule is 20% after one year of service, and then equal quarterly installments thereafter for the next three years. This would mean that after staying with your company for a year, 300 shares would vest and become yours.
RSU's grant date ?fair value? is amortized over the grant's requisite service period (e.g., typically the vesting period). ?Fair value? is equal to the number of RSUs granted multiplied by the grant date fair market value of a share of company stock.
Each RSU will correspond to a certain number and value of employer stock. For example, suppose your RSU agreement states that one RSU corresponds to one share of company stock, which currently trades for $20 per share. If you're offered 100 RSUs, then your units are worth 100 shares of stock with a value of $2,000.
To summarize: RSU tax at vesting date is: The # of shares vesting x price of shares = Income taxed in the current year. If held beyond the vesting date, the RSU tax when shares are sold is: (Sales price ? price at vesting) x # of shares = Capital gain (or loss)
The fair market value for federal income tax purposes is the value of the units at the time they vest and the proceeds are delivered to you. Fair market value is specified in your RSU agreement, and is used to determine the amount of income treated as compensation for federal income tax purposes.