RSU (Restricted Stock Unit)
Company shares granted as compensation that vest over time and are taxed as income when they vest.
Restricted stock units are a form of equity compensation: your employer promises you shares that vest on a schedule, often over several years. When they vest, their value is taxed as ordinary income, just like a cash bonus, and that value becomes your cost basis for future capital-gains purposes.
Two common pitfalls follow from that. First, vesting can create a large, lumpy income spike that affects your bracket, ACA subsidies, and IRMAA. Second, holding vested shares concentrates your wealth in a single stock — your employer's — which is a risk many people overlook because the shares feel 'free.' Selling at vest and diversifying is a frequently used way to manage that concentration.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.