Most people expect their tax return to have a line that says “RSU income: $X.” It doesn’t. If you had restricted stock units vest this year, the return itself won’t ask you a single question about them directly, and this is what can make it tricky.
You don’t need to report vested RSUs as a separate line because they’re already included in your W-2 wages. What you do need to report yourself is any later sale of the shares, on Form 8949 and Schedule D, using the fair market value at vesting as your cost basis rather than the $0 many brokers default to.
This article will show you how to report RSUs on your tax return so you can avoid the common traps.
Where RSU income already appears on your W-2
When your RSUs vest, your employer treats the value of the shares as ordinary compensation, the same as a bonus. It gets added to your wages, taxes are withheld the same way they’d be withheld from a paycheck, and the total shows up in Box 1 of your W-2. By the time you sit down to file, that income has already been reported.
This is why there’s no dedicated RSU section on Form 1040. The vesting event isn’t a separate taxable transaction on the return—it’s already folded into your regular wage income.
Reporting a sale: Form 8949 and Schedule D
Your own reporting responsibility starts the moment you sell the shares. That’s a separate, second taxable event from vesting, and it’s the one your broker’s 1099-B and your tax software won’t get right without your help.
When you sell shares that vested from RSUs, you report the sale on Form 8949 and carry the totals to Schedule D. The gain or loss is the difference between what you sold the shares for and your cost basis, which for RSU shares is the fair market value on the day they vested, not $0 and not the share value on the grant date if that differs from the vesting date.
The cost-basis mistake that causes double taxation
Here’s the part that might trip you up. Brokers are only required to report the amount you originally paid for shares. For RSUs, most people paid nothing, so many 1099-B forms show a cost basis of $0. File with that number as-is, and you’re telling the IRS the entire sale price is a taxable gain, on income you already paid tax on once through your W-2.
The fix is to manually correct the basis on Form 8949 to the fair market value of the shares on their vesting date, which your employer’s vesting statement or your brokerage’s supplemental tax documents will show. Adjust it, and you’re only taxed on the gain or loss since vesting, which is usually a much smaller number. This means entering the broker’s reported basis as-is, then using Adjustment Code B in column (f) to correct the gain in column (g) to reflect the vesting-date value — not just writing in a different basis number.
Can exchange funds accept RSUs and defer tax?
Filing correctly avoids overpaying on income you’ve already been taxed on. It doesn’t do anything about a bigger issue: if most of what you own is stock in one company, you’re holding a concentrated position.
If your vested and unsold RSU shares have grown to represent a large share of your portfolio, contributing appreciated shares to the Glidepath exchange fund lets you diversify into a broader basket without selling. See if your position qualifies before deciding whether to sell or hold.
Common mistakes to check before you file
A few things worth double-checking before you submit your tax return:
- Confirm the cost basis on Form 8949 matches the vesting-date fair market value, not the broker’s default
- Make sure you’re not also re-entering the vesting income anywhere else on the return because it’s already in your W-2 wages
- If you had shares vest across several dates during the year, each batch has its own vesting-date basis, so don’t average them
- Check whether your state has its own capital gains treatment separate from the federal return
Knowing how to report RSUs on your tax return and don’t overpay
Your RSU income is already accounted for the moment it hits your W-2. The part that requires your own attention is the sale: correcting the cost basis so you’re not taxed twice, and deciding what to do with a position that’s grown large enough to matter. Getting the form right avoids an overpayment. Getting the second part right is what actually changes your outcome.
If you’re starting to worry about concentration risk after several years of RSUs piling up, an exchange fund is an option to diversify and defer capital gains.