Restricted Stock and Performance Stock Taxes: A Guide

Getting a restricted stock or performance stock award is a reason to celebrate. But navigating how your restricted stock or performance stock is taxed can be complex. To lessen the complexity, this guide is intended to help you understand how your award is taxed—both when it vests and when you sell shares, as well as what documents you'll need to file.

This tax overview applies to Restricted Stock Units (RSUs), Restricted Stock Awards (RSAs), Performance Stock Units (PSUs), and Performance Stock Awards (PSAs) for tax filing in the United States.

This guide provides general educational information about the U.S. federal tax rules applicable to RSUs, RSAs, PSUs, and PSAs, and the IRS forms to be filed. However, the tax rules are complicated, and this guide is not specific to any one individual taxpayer's circumstances, and it does not cover all situations. We recommend you discuss your specific situation with a tax professional before filing your return. The forms discussed in this guide are publicly available from the IRS; however, using a tax professional, or at minimum, tax preparation software, is recommended to make the tax preparation and filing process easier and to help avoid costly errors.

In this guide, we'll cover:

• When are restricted stock and performance stock taxed?
• 83(b) election for RSAs & PSAs
• How are restricted stock and performance stock taxed?
• Tax document overview
• Completing your IRS tax forms
• Wash sales 

You'll experience two taxable events with restricted stock and performance stock—when the shares are vested and then again when you sell them.

When your award vests, it means you no longer have the risk of forfeiting shares back to the company—they're yours without restriction. Your employer typically delivers shares to you once your award vests.* Generally, your company will withhold ordinary income taxes and FICA taxes from your award—similar to how they withhold taxes from your regular paycheck.

RSAs and PSAs (RSUs and PSUs aren't eligible) give you the ability to use a 83(b) election, which allows you to report the stock award as ordinary income in the year it's granted rather than the year it vests. This may be beneficial if you anticipate making significantly more income in the future or you think the stock could be significantly higher when it's vested. Discuss the benefits and drawbacks with a qualified tax advisor to see if a 83(b) election makes sense for your situation.

Note: You have just 30 days from the RSA and PSA grant date to file an 83(b) election on IRS Form 15620, which must be mailed to the IRS. Also, keep a copy of the form for your records and send a duplicate copy to your employer.

• Restricted stock awards (RSAs) are taxable when they vest. That's when they're taxed as ordinary income, similar to a bonus or other compensation.
• Restricted Stock Units (RSUs) are taxable when they vest and are delivered, and are taxed as ordinary income, just like your wages. As mentioned previously, for most companies, delivery occurs at the same time as vesting. We'll assume vesting and delivery occur on the same date for this article.

At tax time, you will receive a W-2 from your employer that will include the amount of income you recognized when your RSUs vested and the related taxes withheld.

Performance stock awards (PSAs) and performance stock units (PSUs) are taxed as ordinary income, just like RSAs and RSUs, but they won't vest until a certain performance target is met within the vesting period. If the performance target is not met, vesting doesn't occur and you won't receive any shares, but you won't get taxed either.

When you sell shares, you will have a second tax event for any gain or loss in the value of the shares since you acquired them. This will be either a capital gain or a capital loss. If you held the shares for at least a year and a day, you'll be subject to the lower long-term capital gains tax rates instead of the short-term capital rates, which are taxed as ordinary income. The holding period is generally calculated from the day the shares are deposited in your account, not the vesting date.

Here's an example of how this could work:

Sarah had 140 RSUs vest on September 15, 2025, when the closing price for her company stock was $364.09 a share. This resulted in $50,972.60 of taxable income (140 shares x $364.09). Forty-two shares were then sold for $352.44 each to cover the $14,654.82 of taxes due (the tax rate that applies when your RSUs vest will be determined by your employer). Ninety-eight net shares were then deposited into Sarah's brokerage account. Since only full shares can be sold, the $147.66 by which the proceeds from the sale exceeded the taxes due was also deposited in Sarah's brokerage account. If shares had been withheld to cover the taxes, this amount would instead have been added to the amount of federal taxes withheld.

The sale of 42 shares to cover the taxes due at vesting resulted in a short-term capital loss of $489.30 (($352.44 sale price - $364.09 value at vesting) x 42 shares).

Sarah then sold the 98 remaining shares on December 4, 2025, at a price of $379.50 a share. This sale is also short-term because the shares were sold less than a year from the vesting date. Her short-term capital gain is $1,510.18 (($379.50 sale price - $364.09 cost basis) x 98 shares).

At tax time, Sarah will receive a W-2 from her employer which will include the taxable income she recognized when the RSUs vested and the taxes withheld at that time. She will also receive a Form 1099-B from Schwab reporting both the sale to cover the taxes due at vesting and the sale initiated by Sarah on December 4.

Example is hypothetical and for illustrative purposes only.

Calculating how much you gained or lost from the sale of stock depends on your cost basis. For the awards above, cost basis is the FMV of the shares when they vested (as well as any additional fees you paid if the stock is sold).

Using the correct cost basis ensures that you file correctly and aren't taxed more than the required amount. In some cases, the cost basis price reported to the IRS will not need to be adjusted; however, that's not always the case. It's important to review the cost basis reported for your shares sold on the 1099-B form. The cost basis may not reflect the compensation tax you paid through the W-2.

Refer to Schwab's cost basis sheet to help you determine the cost basis on your stock plan transactions so you can file your taxes accurately.

Here's an overview of the documents you may need when you're preparing your tax return.

When you prepare your tax return, you'll use several forms to report your investment transactions and calculate your capital gains and losses. First, you will enter information from Form 1099-B into Form 8949. Next, you will use information from Form 8949 to complete Schedule D. Finally, use information from Schedule D to complete Form 1040.

Here's an illustration showing how these documents work together when reporting stock sales:
 

In February of each year, Schwab typically provides a 1099 Composite & Year-End Summary. This document will include information for all taxable transactions that took place in your brokerage account, including sales of shares to cover the taxes due at the vesting of the shares and sales of the net shares you received.

This Statement will be posted to the Accounts > Statements & Tax Forms section, and you'll receive an email when it's available. As shown in the screenshot below, this statement shows the cost basis of shares you sold as well as the proceeds from those sales.

Note: Do not use the information in this example. This sample form is not a full 1099 Composite statement, and Schwab has focused on the areas where stock plan transactions will be displayed for demonstrative purposes only.

Use Form 8949 to report the details of each stock sale shown on your 1099-B and any other capital asset transactions. This includes both sales to provide the money for tax withholding when your awards vested and any other sales you performed. Form 8949 has two parts, one for short-term capital gains and losses and one for long-term capital gains and losses. You generally will need to file a separate copy of Form 8949 for each group of short- or long-term transactions for which you need to check a different box.

The following graphic illustrates how to complete Form 8949 using information from your Schwab 1099-B for short-term sales of shares you received when your restricted/performance stock vested at Schwab.

The same principles apply to reporting long-term transactions shown on your 1099-B from Schwab as shown above for short-term transactions, except that you will use Part II of Form 8949 and check box E.

Schedule D reports your capital gains or losses and uses totals from Form 8949.

The following graphic shows how to complete Part I of Schedule D.

The same principles shown above for short-term transactions apply to reporting long-term transactions on Part II of Schedule D.

Wash sales occur when you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale (a 61-day window). When a wash sale occurs, you will not be able to claim a loss on a number of the shares sold equal to the number of replacement shares purchased. Instead, the amount of the loss can be added to the cost basis of the replacement shares. Schwab does not adjust your transactions to reflect wash sales. See IRS Publication 550 for additional details, and to learn more, watch Understanding the Wash Sale Rule and/or Wash-Sale Rule: How It Works & What to Know. You can have a wash sale even if the transactions occur in separate accounts or at different brokers.

Example: Sally is granted 40 RSUs on December 15, 2023. The award vests ten shares at a time over the next four years. On December 20, 2024, the first set of ten shares vests and are deposited in Sally's brokerage account. The following year on December 16, 2025, Sally decides to sell the ten shares for a loss of $100. This transaction appears on Sally's Form 2025 1099-B.

On December 18, 2025, the second set of ten shares vests. The shares are then deposited in Sally's brokerage account. The share deposit causes the loss on December 16, 2025, to be disallowed due to the wash sale rule.

Stuck with questions? Call 800-654-259 any time Monday through Friday to get answers to your equity award questions.

Schwab does not provide tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Consult a tax advisor to address your specific circumstances.