What is the difference between RSU and PSU?
The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares are withheld to pay income taxes. The employee receives the remaining shares and can sell them at their discretion.
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.
- Taxation begins at the time of exercise. The bargain element of a non-qualified stock option is considered "compensation" and is taxed at ordinary income tax rates. For example, if an employee is granted 100 shares of Stock A at an exercise price of $25, the market value of the stock at the time of exercise is $50.
- Restricted Stock Units (RSUs) and Backup Withholding. Restricted Stock Units (RSUs) are a form of compensation that is generally taxed at the time of vesting, whereas employee stock options are usually taxed at the time of option exercise. The employer is required to withhold taxes as soon as the RSUs become vested.
- Those plans generally have tax consequences at the date of exercise or sale, whereas restricted stock usually becomes taxable upon the completion of the vesting schedule. For restricted stock plans, the entire amount of the vested stock must be counted as ordinary income in the year of vesting.
Unlike an RSA, no company stock is issued at the time of an RSU grant. After a grant recipient satisfies the vesting requirement, the company distributes shares or the cash equivalent of the number of shares used to value the unit.
- Restricted Stock Units (RSUs) are a company's promise to give shares or cash to an employee in the future. Because RSUs do not have a strike price, they have better downside protection relative to options. Public companies often grant fewer RSUs than they would options because RSUs are more valuable.
- The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares are withheld to pay income taxes. The employee receives the remaining shares and can sell them at their discretion.
- Stock options are a form of compensation that can give you the opportunity to buy your company's stock at a discounted price. But what happens to stock options after a company is acquired? Depending on whether your options are vested or unvested, a couple different things could happen following a merger or acquisition.
RSUs, however, are taxed at the time they are vested, not when you sell. In and of themselves, RSUs are a good, solid equity compensation vehicle. An RSU is a grant valued in terms of company stock, but company stock is not issued at the time of the grant.
- There is no capital gains treatment available at exercise. Employees are taxed at ordinary income rates on the amount received on the vesting date, based on the market value of the stock. Taxation of options depends on whether they are incentive stock options (ISO) or non-qualified stock options (NQSO).
- For businesses, a grant usually refers to the award of options on the company's stock given to an employee to elicit loyalty and incentivize strong job performance. Sometimes, actual shares of stock are granted. After the waiting period, the employee can then exercise these stock options, or sell granted shares.
- Call Options Expiring In The Money. When a call option expires in the money The seller of a call option that expires in the money is required to sell 100 shares of the stock at the option's strike price. Short options that are at least $.01 ITM at expiration are automatically exercised by most brokerage firms.
Updated: 28th November 2019