Restricted Stock Units | Stock Options | Performance Shares
Some differences between restricted stock units, stock options, and performance shares. Specifically tax implications and volatility.
#RSU #restrictedstockunits #stockoptions #SignatureWMG
Restricted Stock Units Stock Options Performance Shares | |||
Value |
Value is equal to # shares x stock price
Value dependent upon stock price only |
Value is equal to # options x (stock price – strike price) Value dependent upon strike price and stock price |
Value is equal to # shares x stock price
Value dependent upon reaching a set performance goal |
Award Implications |
Typically awarded as part of a salary |
Typically awarded as part of a bonus |
Typically awarded as part of a bonus for reaching a set goal |
Tax Implications |
As shares vest, shares are taxed as income
Shares sold within a 1 year holding period after vesting are taxed as income
Shares sold after the 1 year holding period after vesting are taxed as long-term capital gains |
Incentive stock options (ISO’s) do not produce any income tax implications at grant date or exercise date. Option is taxed when it is exercised and sold.
Non-statutory stock options (NSO) are taxed as income on grant date if fair market value is readily determinable. If option value is not readily determinable, there is no taxable event on grant date. Options are then taxed as income based on the fair value of the stock received less the amount paid on the strike price |
As shares vest, shares are taxed as income
Shares sold within a 1 year holding period after vesting are taxed as income
Shares sold after the 1 year holding period after vesting are taxed as long-term capital gains |
Volatility |
Commiserate to stock price |
More volatile based on strike price |
Commiserate to stock price |