RSU tax basics for Canada
RSUs are treated as employment income when they vest — Canada’s rules require reporting the fair market value at vesting, and stock options may still qualify for the 50% stock option deduction if CRA criteria are met. The CRA’s employee stock option guidance is the official reference for how these rules apply at tax time. (canada.ca) (bnnbloomberg.ca)
The fair market value of shares on the RSU vesting date becomes the adjusted cost base (ACB) for those shares and is used to calculate any capital gain or loss when the shares are later sold. (ca.rbcwealthmanagement.com) Employers are required to withhold payroll deductions on employee stock benefits and commonly use “sell‑to‑cover” or net‑settlement mechanics to remit tax at vesting. (canada.ca) The taxable employment benefit from vested RSUs and stock‑option benefits must be reported on the employee’s T4 slip, and the CRA released updated reporting guidance and new T4 codes for the 2024 tax year to capture security‑option benefits and deductions. (canada.ca) On disposition, the capital gain equals the sale proceeds minus the ACB (the vesting FMV), and under current federal rules 50% of that capital gain is included in taxable income. (nesbittburns.bmo.com) The 50% employee stock‑option deduction remains conditional (for example, exercise price at or above FMV at grant and CCPC exceptions); Bill C‑30 implemented new rules for options granted on or after July 1, 2021, and the federal government announced on March 21, 2025 that it would not proceed with a proposed June 25, 2024 change. (torys.com) Cash‑flow mismatches are common because employer withholding at vesting may not match an employee’s marginal tax rate (combined top rates can reach about 53.53%), and employers will often sell only a portion of vested shares to cover remittances. (naspp.com) Proceeds from a sale of RSU shares can be moved into registered accounts, but in‑kind transfers are treated at market value for contribution room purposes and count against TFSA or RRSP limits. (taxtips.ca)
