RSUs aren't a magic investment, they're just taxable salary in disguise.

RSUs aren't a magic investment, they're just taxable salary in disguise.

What Are RSUs, really?

Restricted Stock Units (RSUs) are simply a form of compensation. Once they vest, they become ordinary shares of company stock, just like what anyone can buy on the market.

Generally, many tech companies grant RSUs to employees, hoping the employees will stay and not job hop elsewhere before the RSU Vests (becomes stock). If the employee leaves, they lose the RSUs.

When your RSUs vest, it's as if your employer handed you a cash bonus and immediately bought stock with it. You're taxed on the value at vesting as regular income. Holding them doesn’t make them more valuable or tax-efficient.

Common Misconceptions:

- 'These are special shares, and I should hold onto them'

 - 'I’ll miss out if I sell now'

 - 'It’s like free money, why not let it grow?'

 - 'I’ll pay less tax if I wait a year'

For Israel-based U.S. citizens, there are additional issues. You already paid U.S. tax at vesting, and Israel will later tax the full value again unless planning is done.

The U.S. taxes RSUs as income at vesting. Israel taxes them at sale, on the entire value. Holding RSUs post vesting often leads to mismatch-based cross border extra taxation, commonly misclassified as double taxation.

Selling at vesting lets you lock in your cost basis, pay taxes cleanly, and avoid mismatches. If you believe in the company, you can always rebuy shares on the open market with after-tax money.

For US citizens in Israel, holding shares which came from RSUs isn't loyalty, it's an extra tax risk. If you want to invest, do it with your eyes open and clean cost basis. Sell at vesting, then choose how much exposure you want.