Yes, RSUs have a cost basis, and the RSU cost basis equals the fair market value of the shares on the day they vested. That is the same dollar figure your employer already reported as wages on your W-2, which is why the tax code lets you use it as your starting point when you eventually sell. Get this number right and a later sale produces only a normal capital gain or loss; get it wrong, and you can end up paying tax twice on the same income.
Why the Vesting-Date Value Becomes Your Basis
An RSU is a promise from your employer to deliver shares once you meet certain conditions, usually a service period. You don’t own anything and have no basis until those conditions are satisfied. The moment the shares actually land in your brokerage account, their fair market value on that date becomes your cost basis.1Office of the Law Revision Counsel. 26 USC 83 – Property Transferred in Connection With Performance of Services
The IRS treats that vesting-date value as ordinary compensation, essentially the same as a cash bonus. You owe federal income tax, Social Security tax, and Medicare tax on it in the year of vesting. Because that amount has already been taxed as wages, the law lets you use it as basis so the same dollars aren’t taxed again when you sell.
A simple illustration: 100 RSUs vest when the stock is $50 per share. Your employer reports $5,000 as compensation on your W-2. Your basis in those 100 shares is $5,000, or $50 per share. Anything the price does after that is a capital gain or loss, not more wages.
How Tax Withholding at Vesting Affects Your Share Count
Your employer withholds taxes before delivering the shares. Federal income tax on supplemental wages like RSU income is typically withheld at a flat 22 percent for amounts up to $1 million in a calendar year, plus Social Security and Medicare, and often state supplemental withholding as well.2Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide
Most employers handle this through share withholding, sometimes called sell-to-cover. If 100 shares vest at $50 each and your combined withholding rate is about 40 percent, the company might hold back 40 shares and deliver 60 to your account.
Here is the part people miss. The withheld shares still counted as income to you, and the delivered shares still carry a per-share basis equal to the vesting-date value. In the example above, each of the 60 shares in your account has a $50 basis. The 40 withheld shares were effectively sold at $50 to cover taxes, producing no gain or loss because the sale price matched the basis.
Documents You Need to Nail Down the Number
Three records do the work:
- Your W-2. Boxes 1, 3, and 5 include the fair market value of all shares that vested during the year, folded in with your salary. The W-2 confirms the income was reported, but it won’t give you per-share figures.
- Your RSU release or vesting confirmation. Your brokerage or equity plan administrator issues one for each vesting event, showing the number of shares released, the fair market value per share on the vesting date, and how many shares were withheld. This is the document that gives you your per-share basis.
- Form 1099-B. When you sell, the brokerage reports the proceeds here. The basis field is often $0 or blank for RSU shares, which is the reporting pitfall covered below.
To compute basis for any given sale, multiply the number of shares sold by the vesting-date fair market value per share from your release confirmation. If the sold shares came from more than one vesting event, do the math separately for each batch.
Tracking Basis Across Multiple Vesting Dates
RSUs rarely vest all at once. A four-year schedule typically delivers shares quarterly or annually, so you may accumulate a dozen or more lots at different prices. Each lot has its own basis and its own holding period.
When you sell, you have to identify which lot the shares came from. Without a specific instruction to your broker, the IRS generally defaults to first-in, first-out, treating the oldest shares as sold first. Specific identification lets you pick particular lots instead, which can lower your taxable gain (by selling higher-basis shares) or lock in long-term capital gains rates (by selling shares held more than a year after vesting).
A plain spreadsheet is enough: date, shares delivered after withholding, and vesting-date fair market value per share. Your broker may track some of this, but brokers frequently get RSU basis wrong, so keep your own log.
Fixing the Broker’s $0 Basis on Form 8949
Brokerage firms often report a cost basis of $0, or leave the field blank, on Form 1099-B for RSU shares. The broker may not have the compensation data needed to calculate the vesting-date value. If you file using that $0 figure without correcting it, the IRS treats your entire sale proceeds as gain, taxing the vesting-date income a second time.
Form 8949 is where you fix this. For each RSU sale, enter the proceeds from the 1099-B in column (d) and your actual basis (vesting-date fair market value times the number of shares sold) in column (e). In column (f), enter adjustment code B to flag that the broker’s basis was incorrect or missing. If the 1099-B showed $0 and you enter the correct basis in column (e), enter $0 in column (g).3Internal Revenue Service. 2025 Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets
Totals flow from Form 8949 to Schedule D of your 1040, which splits your gains and losses into short-term and long-term based on how long you held the shares after vesting.
Gain or Loss After Vesting
Once shares are in your account, every dollar of price movement is measured from your basis. If your basis is $50 and you sell at $70, you have a $20-per-share gain. If you sell at $40, you have a $10-per-share loss.
Holding period is measured from the vesting date. Shares sold more than one year after vesting qualify for long-term capital gains rates, which are lower than ordinary rates for most taxpayers. Shares sold within a year of vesting are taxed as short-term gains at your regular income tax rate.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses High earners may also owe an additional 3.8 percent Net Investment Income Tax on the gain, since RSU vesting itself often pushes total income above the NIIT thresholds.5Internal Revenue Service. Topic No. 559, Net Investment Income Tax
The Wash Sale Trap Around Vesting Dates
The wash sale rule can catch RSU holders off guard. If you sell stock at a loss and acquire substantially identical stock within 30 days before or after the sale, the loss is disallowed and instead gets added to the basis of the newly acquired shares.6Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities
A vesting event counts as an acquisition. If you sell company stock at a loss and RSUs happen to vest inside the 61-day window (30 days before through 30 days after the sale), the IRS treats that vesting as a purchase of substantially identical stock and disallows the loss. Because your employer sets the vesting calendar, check upcoming vesting dates before you sell at a loss.
No Section 83(b) Election for RSUs
People who have heard about the Section 83(b) election sometimes ask whether they can use it to lock in a lower basis at grant. You cannot, at least not for RSUs. The election lets a recipient of restricted property choose to pay tax at the grant date rather than the vesting date, and it has to be filed within 30 days of the transfer.7IRS.gov. Form 15620, Section 83(b) Election Instructions But RSUs aren’t property at grant — they’re a contractual promise. Nothing has been transferred to you until vesting, so there is nothing to elect on. RSU basis is always set at the vesting-date fair market value. The 83(b) election applies to restricted stock awards (actual shares delivered at grant with forfeiture restrictions), which is a different instrument.
Double-Trigger RSUs at Private Companies
If you work for a private company, your RSUs may use a double-trigger structure. Shares aren’t delivered until both the time-based schedule is satisfied and a liquidity event, typically an IPO or acquisition, occurs. Until both triggers fire, you owe no tax and have no basis.
When the second trigger hits, basis is set the same way as at a public company: the fair market value on the date the shares are actually delivered. The wrinkle is timing. If you’ve been at the company long enough that time-based vesting is already complete, every accumulated share may vest on a single day, generating a large lump of ordinary income in one tax year. Estimated tax payments can soften the surprise.
How Long to Keep the Records
The IRS generally has three years from your filing date to assess additional tax, so keep your vesting confirmations, 1099-Bs, Form 8949 worksheets, and W-2s for at least three years after you file the return that reports the sale.8Internal Revenue Service. Topic No. 305, Recordkeeping If you still hold unsold RSU shares, hang on to the vesting records for as long as you own the stock, plus three years after the eventual sale is reported. Without those records, proving your basis to the IRS gets difficult.