What Happens to Your RSUs When You're Laid Off? (2026)

What happens to vested and unvested RSUs when you're laid off?

An RSU is a promise to deliver shares, or their cash value, once a vesting condition is met, usually staying employed through a set date. The IRS describes RSUs as an unsecured and unfunded promise by the employer, which is why nothing is yours until the units vest and settle.

Vested, settled shares are yours. They sit in your brokerage or equity-plan account, and leaving the company doesn't take them back.

Unvested units follow your plan document and grant agreement. Because vesting usually depends on continued employment, unvested RSUs are commonly forfeited when employment ends, unless the plan, your grant or a severance agreement provides otherwise. Plans can treat a layoff differently from a resignation, so read the termination section of your own grant rather than relying on what happened to a colleague.

Can a severance agreement change what happens to unvested RSUs?

It can. Some employers offer accelerated vesting, or let units keep vesting on schedule after you leave, as part of a severance package, sometimes in exchange for signing a release of legal claims. An IRS information letter from 2024 describes that kind of offer: an employer would let a departing worker's stock keep vesting through 2027 if he signed a release.

The same letter shows a tax wrinkle. RSUs that vest in a later year are generally treated as deferred compensation for Social Security and Medicare taxes, which are due when the risk of forfeiture ends, while income tax generally waits until the shares are delivered. If continued vesting no longer depends on you working, Social Security and Medicare taxes can come due before you receive the shares. In the case the letter answered, the employer had included the stock's value in the worker's Medicare wages for the year he left; the IRS explained the general rules without ruling on his facts.

Severance pay itself is taxable wages. It's subject to income tax withholding and Social Security and Medicare taxes, and the IRS treats it as a supplemental wage, which employers can withhold on at a flat 22% for 2026.

Read the agreement before you sign. If the equity terms or the release are significant, an employment lawyer can review them.

How are RSUs and severance taxed in a layoff year?

At vesting, the value of the shares delivered is ordinary income, reported in box 1 of your Form W-2, and RSUs are wages for Social Security and Medicare taxes. For tax year 2026, Social Security tax is 6.2% on wages up to $184,500, Medicare tax is 1.45% on all wages, and employers withhold an extra 0.9% Additional Medicare Tax once your wages pass $200,000 in the calendar year (IRS Publication 15).

For income tax, payments that aren't regular wages, such as bonuses and severance, are supplemental wages, and employers usually handle RSU vests the same way. For 2026, an employer can withhold a flat 22% on supplemental wages, and must withhold 37% on supplemental wages above $1 million paid to you in the calendar year. It can instead add the payment to regular pay and use the wage tables in Publication 15-T.

A layoff year can cut either way. Less salary may leave you in a lower bracket than the flat rate assumes; a large vest plus severance can push you above 22% and leave tax to pay at filing. IRS Publication 505 for 2026 says you generally avoid an underpayment penalty if your withholding and estimated payments cover at least 90% of your 2026 tax or 100% of your 2025 tax (110% if your 2025 AGI was over $150,000).

What should you check before your last day?

• • Your grant agreements and the plan document: vesting dates, what happens on termination, and any acceleration terms. Save copies, and your vest confirmations, while you still have access.
• • Your official termination date. Whether a vest date counts can turn on it.
• • Where your vested shares are held, and how you'll reach that account once your work login is gone.
• • Any severance agreement: the equity terms, the release, and the deadline to sign.
• • Stock options, separately. Option agreements set their own deadline to exercise after you leave, and for incentive stock options, keeping their special tax treatment generally requires exercising within 3 months after your employment ends (IRS Publication 525).
• • Your 401(k) match. Unvested match can be forfeited when you leave. If enough people are let go, the plan may have a partial termination: the IRS presumes one when employer-initiated departures reach 20% of participants in the period, and affected employees must then be fully vested.
• • Health coverage. COBRA generally lets you stay on your employer's group health plan for a limited time if the employer had 20 or more employees, though you may have to pay up to 102% of the cost (Department of Labor).
• • Trading restrictions. Trading on material, nonpublic information you learned at work can be illegal insider trading, and leaving doesn't make that information public. Check whether the company's trading policy still applies to you.

Should you sell your vested shares after a layoff?

That's your decision, and this guide doesn't make it for you. It helps to separate the tax question from the investment question.

On tax: your cost basis in RSU shares is the value already counted as income at vest, so selling near the vest price creates little extra gain or loss. Gains on shares held one year or less are short-term and taxed at ordinary rates; held more than one year, they're long-term. For tax year 2026, long-term gains are taxed at 0% up to $49,450 of taxable income for single filers ($98,900 joint), 15% up to $545,500 ($613,700 joint) and 20% above that.

On the investment: one common framing is to ask whether you would buy this many shares of your former employer today with the same cash. Holding vested shares is close to making that choice.

How concentrated are you in your former employer's stock?

FINRA warns that a large holding in your employer's stock ties your savings to the same company as your income. After a layoff the income link is gone, but the concentration may not be, and severance and savings may now have to cover a job search. FINRA also notes that some experts suggest keeping any single stock, your employer's included, to no more than 10% of your investments, and that this could be too high for some people.

• • Add it all up: shares in your brokerage or equity-plan account, company stock in your 401(k), and any ESPP shares. FINRA suggests counting 401(k) company stock too.
• • Compare the total with the rest of your savings, including what you may need to draw on before your next job.
• • Know what would move the stock: the next earnings report, guidance, and filings that explain the layoffs, such as restructuring costs in an 8-K or 10-Q.
• • If you decide to reduce it, selling in stages and the timing of long-term treatment are trade-offs to weigh with a tax professional.

When should you get professional help?

Talk to a tax professional if your layoff year includes a large vest, severance, option exercises or a move between states. An employment lawyer can review a severance agreement with significant equity terms or a broad release. Your HR team or equity-plan administrator is the source for what your plan actually says.

Where does Ecomerate fit?

Ecomerate is an AI research analyst you text in iMessage. It doesn't give tax or legal advice, and it never tells you to buy, sell or hold. If you keep shares in your former employer, or any other US-listed stock, text it the position, for example "I own 400 shares from my RSUs" with the ticker, and a line on why you're holding. It reads new 10-K, 10-Q, 8-K and Form 4 filings for your holdings and texts you, quoting the passage, when something touches those reasons. When a holding moves well outside its normal range, it texts once it finds the cause.

Ask it for a research note and a PDF arrives covering your position's size and share of your portfolio, the bull and bear case, and what to watch next. It covers US-listed stocks, so it can't follow a private company's shares. Can it sell the shares for you? Not yet; automated trading is coming soon. It has a free plan with 10 messages a week, and paid plans start at $11.99 a month.