RSUs Vesting While You Live Abroad: US Tax Treatment

When restricted stock units (RSUs) vest while you're living abroad, the fair market value of the shares on the vesting date is taxable as ordinary income, just as it would be if you were living in the US. If you performed services in more than one country during the RSU vesting period, the income may need to be allocated between countries based on the portion of the vesting period spent in each location. Your employer will typically report the full vested value on your W-2, but you can use the Foreign Tax Credit to offset the US tax for the portion of income allocated to days worked in a foreign country where you also paid foreign income tax on that income. The Foreign Earned Income Exclusion can also apply to RSU income allocated to services performed in a foreign country, as long as you qualify under the Physical Presence or Bona Fide Residence test, but the allocation calculation is fact-specific. When you eventually sell the shares, the difference between the sale price and the fair market value at vesting is a capital gain or loss, with the holding period starting from the vesting date.