RSU cross-border taxation mismatch is not double taxation, and here is why many tax pros get it wrong, with Israel as an example:

RSU cross-border taxation mismatch is not double taxation, and here is why many tax pros get it wrong, with Israel as an example:

Many U.S. expats living in Israel who receive RSUs believe, and are often told, that they’re subject to double taxation. Even some tax professionals describe it this way. But while the pain is real, the terminology is not.

At first glance, it seems obvious: RSUs are taxed in the U.S. when they vest, and then taxed in entirety again in Israel when sold. But in reality, these are two different tax events:

 - The U.S. taxes RSUs as ordinary income at vesting

 - Israel taxes them as capital gains at sale, often assuming a ₪0 basis (if held for more than 2-3 years)

 - The taxes occur in different years and in different baskets - general income vs. passive

Because of this, the foreign tax credit (FTC) cannot be used to offset one against the other, unless both are sold during the same tax year.

This is not double taxation in the legal sense since it’s a mismatch:

 - A timing mismatch (vest vs. sale)

 - A category mismatch (ordinary income vs. capital gains)

That’s why calling it double taxation is misleading. If it were true double taxation, the FTC would apply cleanly. But it doesn’t, because the IRS disallows cross-basket credits.

A true example of real double taxation is self employment taxes due to the US and Israel.

For client clarity and professional accuracy, I recommend using the term: Mismatch-Based Extra Taxation

It reflects the actual economic burden. But it doesn’t mislead clients into expecting FTC relief when none is available.

I believe not only in planning, but to educate as well. Using precise language helps clients plan better and differentiates my services from professionals who oversimplify. RSUs are a classic example where accurate language matters.