For professionals in the Triangle area, Restricted Stock Units (RSUs) are often a significant component of total compensation, especially in tech, biotech, and executive-level roles. But while RSUs can contribute meaningfully to your long-term wealth, they also present complex tax challenges that require careful planning.
At Tax Advisors of Cary, we provide concierge-level tax planning to help North Carolina’s top earners navigate RSUs with confidence, clarity, and strategic foresight.
What Are RSUs?
Restricted Stock Units (RSUs) are employer-issued equity grants that convert into actual shares of stock once certain conditions are met, typically time-based vesting or performance milestones. Until RSUs vest, you do not own the stock, and there is no immediate tax consequence.
When RSUs vest, the fair market value (FMV) of the shares on that date is treated as ordinary income, and it is included in your W-2. This can push you into a higher tax bracket or create underpayment risk.
Taxes Due at Vesting:
- Federal income tax (up to 37% for high earners)
- FICA taxes (Social Security and Medicare)
- North Carolina state income tax (currently 4.5%)
Employers often withhold at a flat 22% federal rate, which is far below the actual tax liability for many high-income earners.
Pro Tip: Review your total income picture—including salary, bonuses, investments, and RSUs—to determine if you need to adjust withholding or make quarterly estimated payments.
Selling vs. Holding RSUs: Capital Gains Considerations
Once vested, your RSUs become stock that you can either sell immediately or hold. Your choice directly affects how you’ll be taxed next.
Selling Immediately:
- The sale price is typically close to the vesting FMV, so no significant capital gain
- No additional tax beyond the income tax already paid at vesting
Holding the Stock:
- Any price appreciation after vesting is subject to capital gains tax when sold
- Short-term capital gains (held <1 year): taxed at ordinary income rates
- Long-term capital gains (held >1 year): taxed at 0%, 15%, or 20% federally
- Short-term capital gains (held <1 year): taxed at ordinary income rates
- Additional 3.8% NIIT (Net Investment Income Tax) may apply to high earners
Tip: Holding may make sense for long-term growth—but consider your overall portfolio, risk tolerance, and need for liquidity.
RSUs vs. ISOs: Do RSUs Trigger AMT?
While Incentive Stock Options (ISOs) can trigger Alternative Minimum Tax (AMT), RSUs do not. However, the income from vested RSUs can raise your total adjusted gross income (AGI) to levels that:
- Phase out deductions and credits
- Trigger additional taxes like NIIT
- Indirectly push you toward AMT exposure in other areas
It’s essential to take a holistic approach when evaluating your total tax liability.
Strategic Tax Planning for RSUs
Smart planning can help you reduce tax liability, avoid surprises, and make the most of your equity compensation. Here are some strategies we use with high-income clients:
- Withholding Optimization
Default RSU withholding is rarely sufficient for high earners. Adjust your W-4 or make estimated tax payments to prevent penalties and large balances due.
- Charitable Contributions
Donating appreciated RSU shares to a donor-advised fund (DAF) can eliminate capital gains taxes while lowering your taxable income.
- Diversification Planning
Holding too much company stock can increase financial risk. Rebalancing through strategic selling can help manage both portfolio risk and tax exposure.
- Timing Your Sales
Coordinate RSU sales with other major income events (bonuses, business distributions, home sales) to level out your tax impact across multiple years.
- Multiyear Tax Projections
We build forward-looking tax models to help you decide when to sell, donate, or hold shares, so you’re never guessing about your tax future.
Why Work with a Concierge Tax Advisor?
RSUs are just one piece of your wealth picture. At Tax Advisors of Cary, we work with North Carolina’s top earners, executives, business owners, and high-net-worth professionals, to provide:
- Year-round strategic tax planning, not just annual prep
- Integration with financial advisors and estate planners
- Custom tax scenarios and projections
- Confidential, high-touch service with executive-level communication
Whether you’re new to equity compensation or managing multiple grants, we provide the strategic guidance to keep you ahead of the curve.
Turn Your Equity into Opportunity
RSUs can be powerful drivers of wealth—but only when handled strategically. By understanding how and when you’re taxed, you can avoid costly surprises and make smart decisions that align with your financial goals.
At Tax Advisors of Cary, we help clients turn equity compensation into long-term opportunity—not short-term headaches.
Want a personalized RSU tax strategy? Contact us today to schedule your consultation.
