Equity compensation is taxed in two stages, and confusing the two is the most expensive mistake an employee with RSUs can make. A restricted stock unit is ordinary income when it vests, valued at the vest-date price — and that same value becomes the cost basis for a capital gain or loss when the shares are later sold. It is the identical two-stage model that crypto staking rewards follow: income at receipt, then capital gains on disposal.
The TradFi Work / Salary template in HQ Wealth is built for employees living this. It tracks payslips, RSU and ESPP vesting, employer match, and withholding, and its default reports include an income statement, a vesting calendar, and a tax pack.
RSUs: income at vest, then capital gains on sale
A restricted stock unit is a promise of shares that converts to actual shares on a vesting date. Nothing is taxable while the grant is merely a promise; the tax events begin at vest.
Stage one — income at vest. On the vesting date, the shares become the employee's property, and their full market value on that date is ordinary income, in most jurisdictions, taxed alongside salary. If 100 shares vest at a price of forty, that is four thousand of ordinary income, whether or not a single share is sold. Critically, that vest-date value also becomes the cost basis of the shares.
Stage two — capital gains on sale. From the vest onward, the shares are an ordinary capital asset. When the employee sells them, the gain or loss is the difference between the sale price and the vest-date basis. Sell immediately at the vest price and there is little or no further gain; hold and sell higher and the increase is a capital gain measured from that basis.
At vest (100 shares, $40 vest price) Debit Equity Holding — RSU lot (asset) $4,000 Credit RSU Compensation Income (income) $4,000
On later sale at $55 Debit Brokerage Account (asset) $5,500 Credit Equity Holding — RSU lot (asset) $4,000 Credit Realised Gain (equity) $1,500
The figure that links the two stages is the vest-date value: it is the income amount at stage one and the cost basis at stage two. This is exactly why staking rewards and RSUs share a template logic — in both, one receipt value is taxed as income now and sets the basis for a gain later. The classic error is forgetting stage one was already taxed and then paying capital gains on the entire sale proceeds, taxing the same four thousand twice. Recording the vest as both income and a new lot at that basis is what prevents the double count.
ESPP: the discount is part of the picture
An employee stock purchase plan lets employees buy company shares, usually at a discount, often with a look-back to the lower of two prices. That discount is the feature that makes ESPP attractive — and the feature that makes its tax treatment more involved than a plain market purchase.
The discount is a benefit the employee received, and at least part of it is generally treated as compensation income rather than pure capital gain. How much, and when it is recognised, depends heavily on the plan's structure and on the jurisdiction's rules — some regimes distinguish qualifying from disqualifying dispositions with quite different outcomes. The cost basis of ESPP shares therefore is not simply what the employee paid; it has to account for any discount already taxed as income, or the eventual sale will overstate the capital gain.
This is general information, not advice for a specific plan, and ESPP rules are among the more jurisdiction-specific corners of equity compensation. The tracking discipline, though, is constant: record what was paid, record the discount, and record what portion was treated as income, so the basis is right when the shares are sold.
Shares withheld to cover tax
Because an RSU vest creates a real income-tax liability with no cash attached, employers commonly cover it by withholding shares — selling or retaining a portion of the vesting shares to pay the tax, and delivering only the remainder to the employee. A grant of 100 vesting shares might arrive as 68 in the account, with 32 withheld.
Two things have to be recorded here, and trackers routinely capture only the first:
- The full vest is the income event. All 100 shares vested and all 100 shares' worth of value is income, even though only 68 landed. The withheld shares do not reduce the income figure.
- The withheld shares paid tax. The 32 shares were effectively sold at the vest price to satisfy withholding, which is a tax payment, not a loss of value the employee never had.
An employee who tracks only the 68 shares that arrived understates their vest income and loses the record of tax already paid through withholding — which can mean over-reporting later or failing to claim withholding credit. The template records the full vest, the withholding, and the net shares delivered as distinct figures so all three stay on the books.
Bringing it together: payslip, calendar, tax pack
Equity compensation does not live in isolation; it sits on top of salary, employer match, and ordinary withholding, all of which the TradFi Work / Salary template tracks together. The vesting calendar shows what vests when, so the income events are anticipated rather than discovered at year end. The income statement folds salary and equity income into one picture. And the tax pack assembles the vest-date income, the basis figures, the ESPP discount, and the shares withheld into an accountant-ready output — across the 12 jurisdictions HQ Wealth supports, since the precise treatment of every step here varies by jurisdiction and is a matter for a professional in the relevant one.
Takeaway: RSUs are income at vest and a capital asset afterwards — the same two-stage model as staking rewards, where the vest-date value is both the income figure and the cost basis. Track the full vest, the ESPP discount, and the shares withheld for tax, or the second tax bill double-counts the value the first one already taxed.