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RSU tax in Canada hits when the shares land in your account, not when you sell them. If a batch is worth $20,000 the day it settles, that $20,000 is taxed like a bonus. Only what the share price does after that counts as a capital gain or loss.
When do RSUs get taxed?
An RSU is a promise of shares once conditions are met, usually time at the company. The CRA’s page on employee security options describes the setup this way: employees acquire securities subject to certain conditions, with a vesting period that can apply after the securities are acquired. Until then you own nothing and owe nothing. The first tax event comes when the shares are acquired, which the CRA treats as the moment title to the shares passes to you, or the moment you gain a legal right to payment for them.
The taxable amount is the fair market value of the shares at that point, minus anything you paid. Most RSUs cost the employee nothing, so the whole value counts. Your employer reports it in box 14 of your T4, the same box as salary, and it also counts as pensionable earnings for CPP.
The second event is the sale. Your gain or loss is usually measured from the value you already reported as income, less selling costs. Confirm that cost base with your broker or plan administrator.
What happens at each step?
| Step | Tax treatment |
|---|---|
| Grant date | Nothing to report |
| Vesting or settlement, public company | Value of the shares is employment income that year |
| Withholding at settlement | Employer withholds income tax and CPP, but not EI |
| T4 reporting | Box 14 employment income, box 26 CPP earnings |
| Sale of the shares | Capital gain or loss against the value taxed as income |
| Private Canadian company (CCPC) shares | Benefit is deferred until you sell the shares |
What does a $20,000 vest cost in Ontario?
Say Nadia in Waterloo earns $90,000 a year and $20,000 of RSUs settle. At that pay level CPP and EI are already maxed out, so the bonus tax calculator is a fair stand-in. It shows $6,165.03 of extra income tax and no extra CPP or EI. She keeps $13,834.97, so 30.8% of the vest is gone before she’s seen a cent.
Then she sells the shares for $26,000. Take the $20,000 already taxed as her cost base and the gain is $6,000. With other income of $110,000, the capital gains tax calculator adds half of that gain to income and shows $1,016.76 of extra tax, or 16.9% of the gain. She keeps $4,983.24.
And if the price had dropped to $15,000? She’d have a $5,000 capital loss, but she’d still have paid tax on the full $20,000 at vesting. That mismatch is the biggest risk of holding RSU shares after they settle.
Will the withholding be enough?
Maybe not. Your employer has to withhold, and the rate it uses may be lower than your real top rate. A large vest can push you into a higher bracket, so the bill at filing can be bigger than what was withheld. Check your top rate with the marginal tax rate calculator, and put money aside for the gap so the taxman doesn’t surprise you in April.
An RRSP deduction can offset some of the extra income, and you can test it in the RRSP calculator. If a big vest is coming late in the year, an estimate from the income tax calculator shows you the full year.
What if some shares are sold to cover the tax?
Some plans sell part of each vest automatically to pay the withholding, and others hold back shares. Either way, the full value at settlement is still your income. The shares that were sold or held back aren’t a deduction, so ask your plan administrator for a statement showing the gross vest, the shares withheld and the shares you kept.
Where do people trip up?
- Treating the sale as the only taxable event. The vest was already taxed.
- Not writing down the share value on the settlement date. It’s your starting cost for the later sale, so keep a record.
- Forgetting the calculators count half of a gain as taxable, the rate in our 2026 data. That figure is marked for review.
- Assuming the same rules cover foreign employers, stock options, private company plans and shares held outside Canada. They follow other rules, and an accountant who handles equity pay is the person to ask.
- Expecting capital losses to be worked through here. How they’re used against other gains isn’t modelled.
Where the numbers come from
The rules on when the benefit arises, the T4 boxes and the withholding come from the Canada Revenue Agency‘s guidance on employee security options and RSUs. Tax amounts use 2026 federal and Ontario data on this site. No government body is connected to this website.
Frequently asked questions
When are RSUs taxed in Canada?
For most public company plans, when the shares are acquired at vesting or settlement. The value is employment income for that year.
Does my employer withhold tax on RSUs?
Yes. Income tax and CPP are withheld on the benefit, but EI isn't.
How is the sale of RSU shares taxed?
As a capital gain or loss. The starting cost is usually the value already taxed as income at vesting, so confirm it with your plan administrator.
Is tax on private company RSUs different?
For a Canadian-controlled private corporation, the benefit is deferred until you sell the shares.
Can the withholding be too low?
Yes. A big vest can push you into a higher bracket, so you may owe more when you file.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill