The Tax Implications of Amazon RSUs | Brighton Jones (2024)

FAQs

Is Amazon RSU taxable? ›

Amazon's RSU vesting schedule is a 4-year vesting schedule, with 5%, 15%, 40%, and 40% of the RSUs vesting on each anniversary of the grant date. Upon vesting, Amazon's RSUs are taxed as ordinary income at the employee's marginal tax rate, with the company withholding a portion of the shares to cover the taxes owed.

When you receive an RSU, you don't have any immediate tax liability. You only have to pay taxes when your RSU vests and you receive an actual payout of stock shares. At that point, you have to report income based on the fair market value of the stock.

You do not have to pay any taxes on your RSUs at the time of the grant. If you have double-trigger RSUs, however, you must pay taxes when each tranche of RSUs is settled and delivered to you. This normally happens when your RSUs vest. But remember—a liquidity event is also a pre-condition for RSUs to be taxed.

You will receive additional stock vests at the end of year 2 and then every 6 months until you've been with the company for 4 years. Many Amazon employees receive additional refresher RSUs as an Amazon employee over time.

Many companies withhold federal income taxes on RSUs at a flat rate of 22% (37% for amount over $1 million). The 22% doesn't include state income, Social Security, and Medicare tax withholding. For people working in California, the total tax withholding on your RSUs are actually around 40%.

The RSUs are assigned a fair market value (FMV) when they vest. Restricted stock units are considered income once vested, and a portion of the shares is withheld to pay income taxes. The employee then receives the remaining shares and has the right to sell them.

Taxable income from RSUs is considered supplemental wages. As supplemental income, employers withhold at a 22% flat rate for the first $1,000,000 of value to cover taxes. Any excess over $1,000,000 is withheld at 37%.

A Simple Strategy for RSUs (Almost) Every Recipient Should Follow. So what's the most tax efficient way to manage your restricted stock? Sell your shares immediately upon vesting. In nearly all cases, this is most advantageous approach, especially if you expect to receive new awards each year going forward.

Receiving Form 1099-B for options 1 and 2

If the RSUs fall into the first or second option, you'll receive a Form 1099-B reporting the total sales proceeds for the number of shares sold. (You may receive a 1099-B for option 3 if you sold any of the shares during the current tax year.)

The value of RSUs is typically recorded in Box 14 of the W-2, which is labeled "Other." Box 14 doesn't have a standard list of codes, thus allowing employers to enter any description they like. You might see the value of your vested stock followed by "RSU."

How to avoid getting double taxed on employee stock purchase plan? ›

They can only report the unadjusted basis — what the employee actually paid. To avoid double taxation, the employee must use Form 8949. The information needed to make this adjustment will probably be in supplemental materials that come with your 1099-B.

A: RSUs are not taxable at grant. Therefore, they allow a recipient to defer compensation into a later year because the recipient does not pick up the value of RSUs as compensation until vesting, which is typically in a year subsequent to the year of the grant.

This means that the employee cannot sell or transfer the units until they are vested. However, once the RSUs vest and the employee has shares of company stock, the shares can be treated like any other stock and are available to sell or transfer as the employee wishes.

Employees at Amazon as Senior Sdm L7 earn an average of $462k, mostly ranging from $470k per year to $603k per year based on 3 profiles. The top 10% of employees earn more than $600k per year.

What Is an Amazon RSU? An Amazon RSU is the right to receive a share or payout at a future date or subject to some performance condition. It is gifted by Amazon at the start of your employment. For reference, one RSU equals one share of stock once you become vested.

Are RSUs Taxed Twice? No, RSUs are not taxed twice. However, it can seem like RSUs are taxed twice if you hold onto the stock and it increases in value before you sell it. RSUs are taxed at the ordinary income tax rate when they are issued to an employee, after they vest and you own them.

RSU income is taxed when your shares vest. Your employer will typically withhold taxes at the federal supplemental wages withholding rate, which is 22% up to $1 million of income and 37% for wages in excess of $1 million. Yes. At vesting, RSU income is reported on your W2, and any taxes withheld are included as well.

Short-term is considered 1 year or less, which is 365 days or less. The short-term holding period is taxed at ordinary income tax rates. Long-term is considered more than 1 year, which is more than 365 days. The long-term holding period is taxed at long-term capital gains tax rates.

You should sell the RSUs that have either lost you money or those that are at break even. The goal is to own a specific amount of employer shares while realizing the least amount of taxes. As an example, let's say you have 100 shares.

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.

What happens to RSU after 4 years? ›

For public companies, RSUs typically “vest” over a three- or four- or five-year period, with a one-year “cliff” for new hires and the remainder of the RSUs typically vesting on a quarterly basis thereafter.

Income in the form of RSUs will typically be listed on the taxpayer's W-2 in the “Other” category (Box 14). Taxpayers will simply translate the figure listed in Box 14 to their federal tax return and, if applicable, state tax return(s).

Background. RSUs are subject to tax for income tax purposes when they are paid out, but for FICA purposes, they are subject to tax when no longer subject to a substantial risk of forfeiture.

The conventional wisdom is you should sell your RSUs as soon as they vest. There is no tax benefit if you continue to hold the shares. Treat vesting RSUs like a cash bonus. If you want to invest in your company, first consider how much exposure you already have.

At retirement, any vested RSUs belong to the employee. If they stand to lose RSUs with significant value, again, it may pay to continue working until the RSUs vest. If your client's employment with the company is terminated involuntarily, in all likelihood, any unvested RSUs will be forfeited.

You lose all your unvested RSU shares when you quit your job. For the vested RSU shares that are already in your brokerage account, you can keep those since it is your money as soon as it vests.

Given that RSUs are taxed as ordinary income and there is no tax benefit for holding them, I typically recommend you sell as soon as you vest and use the proceeds to fund your other financial goals.

Since you'll have to exercise your option through your employer, your employer will usually report the amount of your income on line 1 of your Form W-2 as ordinary wages or salary and the income will be included when you file your tax return.

The income derived from ESOPs and ESPPs are considered as perquisites and taxed accordingly. The income from RSUs should be declared as Other Income. In case you work for a foreign company, the income is treated as a foreign income.

Can vested shares be taken away? If an employee is fired or leaves the company before their shares are fully vested, they may forfeit their unvested shares. This is known as "cliff vesting." The employment contract will determine the terms of the vested shares.

Does RSU count as household income? ›

Using RSU as Income for a Mortgage Loan

In other words, do RSUs count as income when applying for a home loan? The answer to both questions is yes — but only in certain cases. Restricted stock units can sometimes be counted as income for mortgage qualification purposes. But not all banks and lenders allow this.

As an example, if an employee is awarded 1000 RSUs at the time of her employment, and those RSUs become vested after five years, the value of those RSUs at the time they are vested is as follows: Stock Value = $20 per share. RSU Value (when vested) = $20 per share. Taxable income (when vested): $20 x 1000 = $20,000.

When it comes to traditional asset investments (such as stocks), proceeds from the sale can be taxed twice, once at the corporate level and again at the personal level. Then there are capital gains at the state level.

Another common question we get when it comes to taxing stock options is – do stock options get taxed twice? Yes – you now know that they do. You'll pay ordinary income tax on the total amount you earn, and capital gains tax on the difference between your strike price and the market price at the time of exercising.

You sold the stock within two years after the offering date or one year or less from the exercise (purchase date). In this case, your employer will report the bargain element as compensation on your Form W-2, so you will have to pay taxes on that amount as ordinary income.

RSUs allow your employer to defer issuing shares until a later date, which therefore helps to delay stock dilution to existing shareholders.

An Amazon RSU is entitled to receive a share or dividend at a future period or subject to some performance condition. Amazon grants it at the start of your employment. For reference, one RSU equals one share of stock once you become vested.

If you hold Amazon RSUs, the value of your RSUs will not change due to the split, you will simply have 20x the shares at 1/20th the price/share. From a company perspective this split will also make it easier for Amazon to specifically target employee compensation.

You receive 100 RSUs set for distribution over four years (25 shares each year). Each share is worth $100, so the total value is roughly $10,000. After the first year, you have 25 vested shares, then 25 more shares the next year, and so on.

The estimated total pay for a L6 Manager at Amazon Lab126 is $253,979 per year. This number represents the median, which is the midpoint of the ranges from our proprietary Total Pay Estimate model and based on salaries collected from our users. The estimated base pay is $136,457 per year.

How much does an L5 make at Amazon? ›

The estimated total pay for a L5 Area Manager at Amazon is $166,815 per year.

In term of job title, Level 7 manager has "Sr. Manager" in their job titles, and level 7 individual contributor has the word "principal" in their job titles (e.g. Principal Product Manager, Principal Software Development Manager, etc.)

Selling your stock

You'll likely have to pay taxes again if you sell stock you received through an RSU or a stock grant. After you take ownership and pay the income tax on the fair value of your stock, you treat the stock for taxes the same as if you bought the stock on the open market.

RSUs are taxed as income to you when they vest. If you sell your shares immediately, there is no capital gain tax, and you only pay ordinary income taxes. If instead, the shares are held beyond the vesting date, any gain (or loss) is taxed as a capital gain (or loss).

With RSUs, you are taxed when the shares are delivered, which is almost always at vesting. Your taxable income is the market value of the shares at vesting. You have compensation income subject to federal and employment tax (Social Security and Medicare) and any state and local tax.

Options For The Tax Treatment Of RSUs

When you reach your vesting date, you can: Sell for cash. If you like, you can sell all the shares and receive the proceeds, or. Sell for taxes.

Withholding tax

Taxable income from RSUs is considered supplemental wages. As supplemental income, employers withhold at a 22% flat rate for the first $1,000,000 of value to cover taxes. Any excess over $1,000,000 is withheld at 37%.

Income in the form of RSUs will typically be listed on the taxpayer's W-2 in the “Other” category (Box 14). Taxpayers will simply translate the figure listed in Box 14 to their federal tax return and, if applicable, state tax return(s).

Instead of adding it to your ordinary income and taxing it at your top marginal tax rate, the IRS considers bonuses to be “supplemental wages” and levies a flat 22 percent federal withholding rate.

One disadvantage of having RSUs as a form of compensation is that the money is not yours until the shares vest. If you leave the company or are fired before your shares are fully vested, then those shares go back to the company.

How does Amazon RSU work? ›

What Are Amazon RSUs? Restricted Stock Units (RSUs) are shares of Amazon stock that Amazon employees are awarded as a part of their total compensation package. Rather than receiving these shares all at once, shares vest over time.

Amazon employees often get additional RSU grants on an annual basis, most commonly during their annual review and compensation adjustment which happens in Q1 of each year. If you're new, you typically won't get additional shares awarded at your first review, so don't be alarmed if this happens to you.