Double-Trigger RSUs Explained: Taxes, Vesting & What to Expect at IPO
I like to compare restricted stock units (RSUs) to a cash bonus whose value is tied to your company’s stock. RSUs are taxed exactly like a bonus, follow a set vesting schedule, and don’t depend on your personal performance, only on the company’s stock price.
But things get more complicated with double-trigger RSUs.
What Are Double-Trigger RSUs?
A standard (single-trigger) RSU vests after you meet one requirement: time or performance. A double-trigger RSU adds a second hurdle: a liquidity event such as an IPO or a company acquisition.
To receive your shares, both conditions must be met:
Time-based vesting – You remain with the company long enough for the shares to vest.
Liquidity event – The company goes public or is acquired.
If the company never has a liquidity event, you may never receive the shares—no matter how long you stay.
Example: Will B. Rich
Initial Grant:
March 2024: Will joins a late-stage private company and is granted 1,000 double-trigger RSUs.
Vesting schedule: 25% after one year, then quarterly over four years.
By early 2025, Will has satisfied the time-based requirement for 25% of the shares, and by mid-2026 he has 562 shares time-vested. But because the company is still private, none of those shares are his for tax purposes.
IPO Announced:
April 2026: The company announces a planned IPO in June.
Expected price: $25–$35 per share.
Second Trigger Met:
June 2026: The company goes public at $30/share.
Result: The 562 shares that had already time-vested are now fully vested.
Tax impact: Will recognizes ordinary income of $16,860 (562 × $30), subject to federal, state, local, Social Security, and Medicare taxes, even though he can’t sell until the IPO lock-up ends.
After the Lock-Up:
December 2026: Lock-up expires. Another 125 shares time-vest during this period and are taxed as ordinary income when they vest.
Stock price: $40/share. If Will sells the 562 IPO-vested shares now, he realizes a short-term capital gain of $10 per share (from $30 to $40), or $5,620 total.
Assuming a 24% federal bracket, that’s about $1,348 in federal tax, plus potential Net Investment Income Tax and state and local taxes.
Key Takeaways
Two hurdles: Double-trigger RSUs require both time-based vesting and a liquidity event.
Tax timing: Income tax hits when both triggers are satisfied, often at IPO, regardless of whether you can sell immediately.
Capital gains later: Any appreciation after the liquidity event is subject to short- or long-term capital gains tax depending on your holding period.
If you’re granted double-trigger RSUs, plan ahead. Understand your vesting schedule, estimate potential taxes at liquidity, and set aside cash for that tax bill, especially if you can’t sell right away.