RSAs vs RSUs: How Restricted Stock Actually Works
“Restricted stock” sounds straightforward, but it can mean different things. RSAs and RSUs often look similar on the surface, yet they differ in when you actually own shares and when income typically shows up for tax purposes.
Understanding that distinction helps prevent surprises, especially when equity vests or is delivered and taxes suddenly appear.
The Simplest Way to Tell RSAs and RSUs Apart:
Two questions resolve most confusion:
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Have actual shares been issued yet, or does only a future promise exist?
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When is income typically recognized for tax purposes?
Those two answers usually tell you whether you are looking at an RSA or an RSU, and why the tax experience can feel very different.
What “Restricted” means:
“Restricted” generally means you do not yet have full, unconditional ownership. Common restrictions include:
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A vesting schedule where ownership is earned over time
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A company right to take shares back if you leave before vesting, often called repurchase or forfeiture rights
The restriction affects ownership timing, which then affects tax timing.
RSAs: shares now, vest later
A Restricted Stock Award (RSA) typically means:
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Actual shares are issued up front
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The company can take back unvested shares if you leave before vesting
You are a shareholder immediately, but your ownership is conditional until vesting is complete.
RSA tax timing:
If nothing special is done, income is commonly recognized as shares vest, based on their value at each vesting date, even if you do not sell any shares.
This can result in taxable income over time as restrictions lapse.
RSA capital gains clock:
Because shares are issued up front, the capital gains holding period can begin earlier than with RSUs.
However, without an 83(b) election, the practical holding period for taxable purposes often aligns with when shares vest and are treated as income. The key point is that the holding-period timeline depends on when the shares are treated as taxable, not just when they were issued.
RSUs: promise now, shares later:
A Restricted Stock Unit (RSU) typically means:
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You do not receive shares up front
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You receive a promise to deliver shares later, usually tied to vesting
Until delivery occurs, you do not own stock and are not a shareholder.
RSU tax timing:
Income usually shows up when shares are delivered, which is often at vesting. The value of the shares at delivery is commonly treated as compensation income.
RSU capital gains clock:
The capital gains holding period generally starts when shares are actually delivered, because that is when ownership begins.
Side-by-side recap:
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Ownership:
RSA = shares now, restricted
RSU = shares later, delivered at vest -
Ordinary income timing:
RSA = commonly as shares vest
RSU = commonly at delivery or vest -
Capital gains timing:
RSA = may start earlier, depending on tax treatment
RSU = starts at delivery
83(b) Election (Limited Situations):
An 83(b) election may be available only when actual shares have been issued but are still subject to vesting or repurchase.
Because RSAs issue shares up front, this is one of the contexts where an 83(b) election can arise.
RSUs do not issue shares up front, so an 83(b) election does not apply to standard RSUs.
For a full explanation of how the election works and its risks, see 83(b) Election Explained.
Private vs public differences:
The instrument itself may be the same, but the experience can feel different depending on the company environment:
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Private companies:
Valuation may be less obvious, and liquidity may be limited -
Public companies:
Market prices are visible, and withholding systems are often more automated
For how context changes the experience, see Private vs Public Company Equity Compensation.
Common questions:
What does “restricted stock” mean?
It usually means there are strings attached, often vesting and or a company right to take shares back if you leave early.
Do RSUs give you shares immediately?
No. RSUs are a promise to deliver shares later, typically tied to vesting.
When are RSAs taxed?
Commonly as shares vest, based on the value at each vesting date.
When are RSUs taxed?
Commonly when shares are delivered, which is often at vesting.
Does an 83(b) election apply to RSUs?
Generally no. RSUs do not issue shares up front, so there is no transfer of property for an 83(b) election to apply to.
To Discuss your Equity Compensation and Wealth Management Needs:
Arc Element Wealth Design is a Nebraska-registered investment adviser. This material is provided for general educational and informational purposes only and does not constitute individualized financial, legal, or tax advice. Examples are simplified and may not reflect your specific circumstances. Investing involves risk. For full disclosures, visit: Disclosures