When I receive my W-2 and see "RSU" listed, I'm looking at how my company reported restricted stock units that vested during the tax year. RSUs that vest are included as regular wages in Box 1 of your W-2, and may also appear separately in Box 12 or Box 14 for informational purposes.

This means I don't need to report the RSU amount as separate income since it's already counted in my total wages. The value shown represents the fair market value of the shares when they vested, not when I received the original grant.

I need to pay close attention to how my employer handled tax withholding on these RSUs, especially if they used a sell-to-cover method. Getting this right on my tax return ensures I don't overpay or underpay taxes on my stock compensation.

Key Takeaways

• RSU income is already included in Box 1 wages on your W-2 and should not be reported as separate income
• The RSU value represents fair market value at vesting time and creates a taxable event for ordinary income
• Proper reporting of RSU sales requires tracking cost basis to avoid double taxation on the same shares

How RSUs Are Reported on Your W-2

Your employer reports RSU compensation in multiple boxes on your W-2, with RSU income included in Box 1 wages. Additional details may be provided in Box 14 for informational purposes.

RSUs in Box 1 and Total Wages

When my RSUs vest, the fair market value becomes taxable income that my employer includes in Box 1 of my W-2. This means my total wages shown in Box 1 will be higher than just my base salary.

The RSU income gets added to my regular salary and other compensation. If I earned $80,000 in salary and had $20,000 worth of RSUs vest during the year, my Box 1 would show $100,000 in total wages.

My employer treats vested RSUs as regular wages for tax withholding. They typically withhold shares to cover taxes, but the full market value still appears in my Box 1 income.

This reporting happens automatically when RSUs vest. I don't need to calculate or add anything myself since my employer handles the W-2 reporting requirements.

Purpose of Box 14 RSU Entries

Box 14 RSU shows the value of restricted stock units that vested during the tax year for informational purposes only. This amount is already included in my Box 1 wages.

The Box 14 entry helps me understand how much of my total compensation came from stock grants versus salary. It's useful for tax planning and record keeping.

I don't report the Box 14 RSU amount as separate income on my tax return. This would create double taxation since the income is already in Box 1.

The Box 14 information becomes important when I eventually sell the shares. I need this data to calculate my cost basis and determine capital gains or losses.

Comparing Box 1, Box 14, and Box 12 Codes

Different employers use different methods to report RSU compensation on W-2 forms. Some use Box 14 labeled "RSU" while others use code "V" in Box 12.

Box 1: Contains the actual taxable income from vested RSUs added to my total wages.

Box 14: Provides supplemental information showing RSU value for reference only.

Box 12 Code V: Some employers use this code instead of Box 14 to report the same RSU information.

All three boxes work together to give me a complete picture. Box 1 affects my tax liability, while Box 14 and Box 12 provide details for my records.

Vesting and Taxable Events for RSUs

RSUs become taxable when they vest, not when you receive the initial stock grant. The fair market value on your vesting date determines how much taxable income gets added to your W-2.

Vesting Date and Fair Market Value

The primary taxable event for RSUs occurs at vesting, when restrictions lift and I gain full ownership of the shares. The vesting date marks the exact day my RSUs convert to actual stock shares.

My employer calculates taxable income using the stock's fair market value on the vesting date. If my company's stock trades at $50 per share when 100 RSUs vest, I owe taxes on $5,000 of income.

Some companies have delivery lags where vesting and delivery dates differ. In these cases, the fair market value on the delivery date typically determines my taxable income amount.

For example, if my RSUs vest on December 1st at $60 per share but shares aren't delivered until December 15th at $65 per share, I owe taxes based on the $65 value.

Vesting Schedule and Graded Vesting

Most RSU grants follow a vesting schedule that releases shares over multiple years. Common schedules include four-year vesting with 25% releasing each year.

Graded vesting means my RSUs vest in portions rather than all at once. A typical schedule might be:

• Year 1: 25% of total grant
• Year 2: 25% of total grant
• Year 3: 25% of total grant
• Year 4: 25% of total grant

Each vesting event creates a separate taxable event. If I receive 400 RSUs with four-year graded vesting, 100 shares vest each year and generate taxable income based on that year's stock price.

Some companies use cliff vesting where no shares vest until a specific date, then all vest at once.

Taxable Income at Vesting

RSUs are treated like cash bonuses paid in stock, meaning I owe ordinary income taxes when shares vest. The IRS considers the fair market value as regular wages.

My vested RSUs appear in Box 1 of my W-2 along with my salary and other compensation. My employer typically withholds federal, state, Social Security, and Medicare taxes automatically.

The taxable amount equals the number of vested shares multiplied by the stock's fair market value on the vesting date. If 200 RSUs vest when the stock trades at $75, I report $15,000 as taxable income.

Tax withholding appears in boxes 2, 4, and 6 on my W-2, just like regular wage withholding.

RSU Tax Withholding and Tax Liability

When RSUs vest, my employer must handle multiple tax withholdings including federal income tax, Medicare tax, and state taxes. Most companies use sell-to-cover methods to automatically manage these tax obligations.

Federal Income Tax Withheld on RSUs

My employer treats vested RSUs as regular income and withholds federal income tax at the time of vesting. The tax withholding on RSUs follows the same process as my regular paycheck withholdings.

The federal income tax withheld appears on my W-2 in Box 2. This amount includes both my salary withholdings and any tax taken from RSU transactions.

Important withholding details:

• RSUs are taxed at my marginal tax rate
• Withholding may not cover my full tax liability
• I might owe additional taxes when I file my return

I should verify my RSU tax withholding matches my W-2 by comparing my final paystub to Box 2 on my W-2 form.

Medicare and State Tax Implications

Medicare tax applies to my vested RSUs at a rate of 1.45%. If my total income exceeds $200,000, I pay an additional 0.9% Medicare surtax on the excess amount.

State tax withholding varies by location. Some states have no income tax, while others tax RSUs at rates up to 13.3%.

Tax rates I need to know:

• Standard Medicare tax: 1.45%
• Additional Medicare tax: 0.9% (on income over $200,000)
• State tax: 0% to 13.3% depending on my state

Social Security tax also applies to RSU income up to the annual wage base limit.

Sell-to-Cover Transactions

Most employers use sell-to-cover transactions to handle RSU tax withholding. This means my company automatically sells some of my vested shares to pay the required taxes.

The sell-to-cover process works automatically. When my RSUs vest, my employer sells enough shares to cover federal income tax, Medicare tax, and state tax withholding.

What happens during sell-to-cover:

1. My RSUs vest at fair market value
2. Company calculates total tax liability
3. Enough shares are sold to cover taxes
4. I receive the remaining net shares

I receive fewer actual shares than originally vested, but my employer has already paid my tax obligations. The full RSU value still appears as income in Box 1 of my W-2 even though some shares were sold for taxes.

Reporting RSU-Related Stock Sales and Capital Gains

When I sell RSU shares after vesting, I must report the transaction separately from the W-2 income to avoid paying taxes twice on the same value. The sale of RSUs requires Form 1099-B and Form 8949 for accurate capital gains or losses reporting.

Cost Basis and Avoiding Double Taxation

My cost basis for RSU shares equals the fair market value reported on my W-2 when the shares vested. For example, if my RSUs had a fair market value of $5,000 when they vested, that amount appears as ordinary income on my W-2.

My cost basis for those shares becomes $5,000. The W-2 shows the full market value as ordinary income.

The 1099-B only reports capital gains or losses from the sale. I must track both transactions separately:

• W-2 income: Fair market value at vesting (taxed as ordinary income)
• 1099-B transaction: Capital gain or loss from sale price minus cost basis

Form 1099-B and Schedule D Reporting

My broker sends me a Form 1099-B showing the proceeds from selling RSU shares. This form may not show the correct cost basis for RSU transactions.

I use Form 8949 to detail the sale of stocks, including RSUs. This form requires information about the purchase date, sale date, proceeds, and cost basis for each stock transaction.

The key forms I need:

• Form 1099-B: Shows sale proceeds and may show incorrect cost basis
• Form 8949: Details each stock transaction with correct cost basis
• Schedule D: Summarizes capital gains and losses from Form 8949

I transfer the information from Form 8949 to Schedule D. Schedule D calculates my total capital gains or losses for the tax year.

Calculating Capital Gains or Losses

I calculate my capital gain or loss by subtracting my cost basis from the sale price. After RSUs vest, selling the shares may result in capital gain or loss depending on the sale price compared to the cost basis.

Capital Gain/Loss = Sale Price - Cost Basis

My holding period determines the tax treatment:

• Short-term: Held one year or less, taxed as ordinary income
• Long-term: Held more than one year, taxed at capital gains rates

The vesting date starts my holding period, not the original grant date. If I sell RSU shares immediately after vesting, I typically have a short-term capital gain or loss.

If shares are sold at a loss, this can offset other capital gains, providing a tax advantage. I can use capital losses to reduce my overall tax liability.

Equity Compensation and Broader Tax Filing Considerations

RSUs create taxable income at vesting that affects your overall tax situation differently than stock options or grants. Understanding how ordinary income tax rates apply to equity compensation versus capital gains rates helps you plan better tax strategies and ensure proper IRS compliance.

RSUs vs. Stock Options and Stock Grants

RSUs become taxable income when they vest, with no choice in timing. The full market value gets added to my W-2 as ordinary income.

Stock options give me control over when I exercise them. I can time the tax event by choosing when to buy the shares.

Stock grants work similarly to RSUs but may have different vesting schedules. Both create taxable compensation at vesting that appears on my W-2.

The key difference is timing control. With stock options, I can spread exercises across multiple tax years to stay in lower brackets.

Ordinary Income Tax vs. Capital Gains Tax Rates

When RSUs vest, the income gets taxed at ordinary income tax rates, which range from 10% to 37% for 2025. This is the same rate as my salary.

After I own the shares, any future gains or losses get taxed as capital gains. Short-term capital gains (held less than one year) face ordinary income rates.

Long-term capital gains (held over one year) get preferential rates of 0%, 15%, or 20%.
Example: If my RSUs vest at $50 per share, that $50 gets taxed as ordinary income.

If I sell later at $60, only the $10 gain faces capital gains treatment. Strategic tax planning becomes important because large RSU vesting events can push me into higher tax brackets unexpectedly.

Tax Filing and IRS Compliance

My employer reports RSU income on my W-2 in the year of vesting. This taxable income appears in Box 1 along with my regular salary.

I must report any stock sales on Schedule D of my tax return. The cost basis starts at the vesting day value that was already taxed on my W-2.

Important filing considerations:

• RSU income may require estimated tax payments
• Large vesting events can trigger underpayment penalties
• I may need to adjust my W-4 withholdings

Filing taxes with stock options and RSUs requires tracking both the original income and any subsequent sales throughout the tax year.

TurboTax and similar software can handle basic RSU reporting. Complex situations may need professional help.

Frequently Asked Questions

RSUs appear in specific boxes on your W-2 form and are treated as regular income when they vest. The tax reporting can be confusing because the income shows up in multiple places on your tax document.

How are Restricted Stock Units reported on a W-2 form?

RSU income appears in Box 14 "Other" on your W-2 when restricted stock units vest during the tax year. However, this amount is already included in your regular wages shown in Box 1.

RSUs on your W-2 indicate that shares have been delivered to you, which typically happens after the vesting period ends. Your employer includes the fair market value of the vested shares as part of your total wages.

The RSU amount in Box 14 serves as information only. You don't report this as separate income on your tax return since it's already counted in your regular wages.

What are the tax implications of receiving RSUs in your compensation package?

RSUs are taxed as ordinary income when they vest, not when you receive the initial grant. The tax rate matches your regular income tax bracket for that year.

Once RSUs transfer to you, they're included as wages and taxable at fair market value. Your employer typically withholds taxes by selling some of your shares automatically.

You may owe additional taxes if your employer doesn't withhold enough. The withholding rate for supplemental income like RSUs is often 22% for federal taxes, which might be less than your actual tax rate.

How can one differentiate between income from RSUs and regular wages on a W-2?

Your total wages in Box 1 include both your regular salary and RSU income combined. The RSU portion appears separately in Box 14 with an "RSU" label or similar code.

To verify RSU tax withholding, check your final paystub and compare it to your W-2. The total federal income tax withheld should match Box 2 on your W-2.

Your pay stubs throughout the year will show RSU income as separate line items when shares vest. These amounts add up to the total shown in Box 14 of your W-2.

What should I do if my RSUs are not reflected on my W-2?

Contact your HR department immediately if you notice missing RSU income on your W-2. Common reporting issues include missing earnings that need to be addressed with employers.

Check your pay stubs from the year to confirm when RSUs vested. Only RSUs that vested during the tax year should appear on that year's W-2.

If RSUs vested but don't appear on your W-2, your employer may need to issue a corrected W-2. Don't file your tax return until this gets resolved to avoid complications.

Are there any specific codes to look for on the W-2 that relate to RSU income?

RSU income typically appears in Box 14 with an "RSU" code or label. Different employers may use slightly different abbreviations or codes.

Some companies use codes like "RSUG" for RSU gross income or similar variations. The exact code varies by payroll system, but it will clearly relate to restricted stock units.

Box 14 RSU shows the value of restricted stock units that vested during the tax year. This helps you track your equity compensation separately from your base salary.

How does the vesting of RSUs affect the reporting of income on a W-2?

RSUs only appear on your W-2 in the year they actually vest, not when you first receive the grant.

The vesting date determines which tax year the income gets reported.

When RSUs vest, your employer should handle the tax withholding correctly by including the income in your regular payroll.

The fair market value on the vesting date becomes your taxable income.

If you have RSUs that vest over multiple years, you'll see RSU income spread across several W-2 forms.

Each year only shows the RSUs that vested during that specific tax year.