RSU Tax Calculator – How Much Tax Will You Pay When RSUs Vest?

That vesting notification just landed in your inbox. A batch of RSUs has vested, and for a moment, it feels like a win. Then the questions start: How much of this is actually mine? How much goes to taxes? And why does my paycheck look so different this month?

Here’s the thing most employees are blindsided by RSU taxes. Their employer withholds 22% at vesting, but their actual federal tax rate is 24%, 32%, or even 35%. That gap quietly builds into a surprise bill every April. For tech workers across the U.S., from Seattle to Austin to New York, this is one of the most common and frustrating financial surprises tied to equity compensation.

The RSU tax calculator on this page is built to show users exactly what they owe federal tax, state tax, Social Security, and Medicare and more importantly, the withholding gap they need to plan for. Let’s break it all down.

What Is an RSU and How Does It Work?

A restricted stock unit (RSU) is a promise from an employer to deliver shares of company stock once certain conditions are met most commonly, continued employment over a set period. The word “restricted” refers to this waiting period, not to any restriction on the stock itself once it’s received.

The process works in two stages. First, there is the grant date the day the employer issues the RSU award and sets the vesting schedule. At this point, the employee owns nothing taxable. Second, there is the vesting date the day the shares are actually delivered. This is when taxes kick in.

Unlike stock options, RSUs do not require the employee to purchase shares at a set price. The shares arrive automatically once the vesting conditions are met. Whether the company’s stock price is up or down from the grant date, the RSU still has value which is one reason restricted stock units have become the dominant form of equity compensation at major U.S. tech companies.

It helps to understand RSUs as the equivalent of receiving a cash bonus, except the payment comes in the form of company stock. The IRS treats it exactly that way as ordinary income on the day the shares are delivered.

How to Use the RSU Tax Calculator (Step-by-Step)

The RSU tax calculator on this page walks users through their vesting event in five inputs. Here is what each one means and how to fill it in accurately.

Step 1 — Enter the number of RSUs vesting This is the number of shares being delivered in the current vesting tranche, not the total grant. If a four-year vesting schedule delivers 25% per year, enter only the shares vesting this period.

Step 2 — Enter the stock price at vesting Use the closing market price of the company’s stock on the vest date. For private company RSUs, use the most recent 409A valuation provided by the employer.

Step 3 — Enter base salary Include total annual wages base pay plus any cash bonuses expected for the year. This determines which federal tax bracket the RSU income lands in.

Step 4 — Select filing status Single filers hit higher tax brackets at lower income levels than married filing jointly filers. This input significantly affects the withholding gap calculation.

Step 5 — Select state State income tax varies widely. Texas, Florida, and Washington have no state income tax. California adds up to 13.3%. New York City residents face both state and city taxes.

Worked Example Software Engineer in Austin, TX

Say a software engineer in Austin earns $130,000 per year and has 200 RSUs vesting at a stock price of $75 per share.

• Taxable income from RSUs: 200 × $75 = $15,000
• Total income for the year: $130,000 + $15,000 = $145,000
• At $145,000, this filer sits in the 24% federal bracket
• Employer withholds at the IRS flat rate of 22%
• The calculator shows a federal withholding gap of 2% or $300 on this vest

That $300 shortfall seems small. But multiply it across four vesting events a year, add a rising stock price, and include state taxes and the gap grows fast.

Understanding Your RSU Tax Results

Once users run their numbers through the RSU tax calculator, they receive five key outputs. Here is what each one means in plain terms.

Taxes Due at Vest — The total estimated tax liability based on the user’s actual marginal rate, not the flat 22% withholding.

Estimated Taxes Withheld — What the employer is actually holding back at the IRS supplemental rate.

Withholding Gap — The difference between what is owed and what was withheld. This is the number that becomes a tax bill in April if not addressed.

Estimated After-Tax Value — The real dollar value of the vested shares after all taxes are accounted for.

Under-Withholding Flag — A signal that the user needs to take action — either through a W-4 adjustment or quarterly estimated tax payments.

The table below illustrates how these numbers break down for the Austin engineer example:

Tax Type	Rate	Amount (on $15,000 vest)
Federal Withholding (flat IRS rate)	22%	$3,300
Actual Federal Tax (24% bracket)	24%	$3,600
Social Security (6.2%)	6.2%	$930
Medicare (1.45%)	1.45%	$217.50
Texas State Tax	0%	$0
Total Estimated Tax Due	—	$4,747.50
Withholding Gap	—	$447.50

A Texas resident gets off lightly on state taxes. The same vest in California or New York would look very different with state tax adding thousands more to the bill.

How Are RSUs Taxed? The Two-Event Rule

Understanding RSU taxation comes down to one key concept: there are two separate tax events, and they are governed by entirely different rules. Confusing them is the root of most RSU tax mistakes.

Tax Event 1 — Vesting (Ordinary Income)

When RSUs vest, the IRS treats the shares exactly like a cash paycheck. The fair market value of the shares on the vest date is added to the employee’s ordinary income for that year and reported on Form W-2, Box 1.

The formula is simple:

Taxable Income at Vesting = Number of Shares Vested × Stock Price on Vest Date

This amount is subject to federal income tax at the employee’s marginal rate, Social Security tax (6.2%, up to the $184,500 wage base in 2026), Medicare tax (1.45% on all wages), and any applicable state income tax. It is not subject to the more favorable capital gains rates it is ordinary income, as high as 37% federally.

Tax Event 2 — Sale (Capital Gains)

After the shares vest and are deposited into the employee’s brokerage account, selling those shares triggers a second tax event. This is where capital gains tax on RSUs comes in.

The key rule here is the holding period, which starts from the vest date not the original grant date:

• Sell within 1 year of vesting → short-term capital gain, taxed at ordinary income rates
• Hold more than 1 year after vesting, then sell → long-term capital gains, taxed at 0%, 15%, or 20% depending on total income

The RSU cost basis for this calculation is the fair market value at vesting — the same amount already taxed as ordinary income. If a share vested at $75 and later sells at $95, only the $20 gain per share is a capital gain. The original $75 was already taxed at vesting.

This is also why RSUs are not technically taxed twice as long as the cost basis is reported correctly, each dollar is taxed only once.

Why Is the RSU Withholding Rate Only 22%? (And Why It’s Not Enough)

Let me explain the most frustrating part of RSU taxation the withholding gap.

Per IRS Publication 15 (Circular E), employers are required to withhold federal income tax on supplemental wages — including RSU vests at a flat rate of 22% for amounts under $1 million. For vests exceeding $1 million in a single event, the rate jumps to 37%. This flat rate applies regardless of the employee’s actual income or tax bracket.

The problem is structural. The 22% rate only matches reality for single filers earning between $50,400 and $105,700 in taxable income in 2026. Most tech and finance employees earning RSUs are well above that threshold before the vest is even counted.

Consider this: a product manager at a mid-size tech company earning $175,000 in base salary is already in the 32% federal bracket. When $60,000 in RSUs vest on top of that, every dollar of RSU income is taxed at 32% but the employer only withholds 22%. That is a 10-percentage-point gap on $60,000, creating a $6,000 shortfall that arrives as a tax bill in April.

Why are RSUs taxed so high? They are not taxed at a special rate they are taxed as ordinary income, the same as a salary. The “high tax” feeling comes from two things: the vest pushes total income into a higher tax bracket than the salary alone would reach, and the 22% withholding rate creates an illusion that less is owed.

The RSU tax withholding issue also compounds when multiple vesting events occur in one year. Each vest is withheld at 22% independently, while the cumulative income climbs into higher and higher brackets.

Salary	RSU Vest	Total Income	Actual Federal Bracket	Withholding Rate	Gap
$80,000	$25,000	$105,000	22%	22%	~$0
$130,000	$50,000	$180,000	24%	22%	~$1,000
$175,000	$60,000	$235,000	32%	22%	~$6,000
$250,000	$100,000	$350,000	35%	22%	~$13,000

Source: 2026 IRS federal tax brackets per IRS Revenue Procedure 2025-32. Figures are approximate and exclude FICA and state taxes.

Real-World RSU Tax Use Cases

Scenario 1 — Software Engineer in Seattle, WA

A software engineer earning $160,000 base salary has $80,000 in RSUs vesting this year. Washington state has no income tax. Federal bracket: 32%. Employer withholds 22% ($17,600). Actual federal tax on the vest: approximately $25,600. Withholding gap: $8,000. The engineer needs to make estimated tax payments or adjust their W-4 before year-end.

Scenario 2 — Marketing Manager in New York, NY

A marketing manager earning $95,000 base salary has a $30,000 RSU vesting event. Combined federal and New York State tax liability on the vest is significantly higher than the 22% withholding. New York City residents also face city income tax adding up to 3.876% on top of state rates. The effective combined tax burden on the vest can exceed 40%.

Scenario 3 — Recent Grad at a Tech Startup in Austin, TX

A first-time RSU recipient earning $72,000 has a small $10,000 vesting event. At this income level, the 22% flat withholding is close to the actual 22% federal bracket meaning the tax situation is relatively aligned. This is the one scenario where the withholding gap is minimal. Still, Social Security and Medicare add to the total tax bill beyond what many first-time recipients expect.

Scenario 4 — Senior Engineer in California

This is where RSU tax planning becomes critical. A senior engineer earning $250,000 in base salary with $200,000 in RSUs vesting faces federal tax at 35%, California state tax at 11.3%, Medicare at 1.45%, and an Additional Medicare Tax of 0.9% above $200,000. Combined marginal rate: over 49%. Employer withholds at 22% federal and 10.23% California state. The withholding gap on $200,000 can exceed $25,000 a significant tax bill that requires proactive quarterly estimated tax payments.

Common RSU Tax Mistakes (And How to Avoid Them)

Most RSU tax problems are preventable. These are the mistakes that show up most often and that competitors’ calculator pages rarely address.

Mistake 1 — Assuming the 22% withholding covers the full tax bill

This is the most common RSU tax mistake by far. The employer’s 22% withholding is a floor, not a ceiling. Anyone in the 24% bracket or above will owe more. The RSU tax calculator on this page shows the exact gap so users can plan ahead.

Mistake 2 — Reporting the wrong cost basis and paying double tax on RSUs

When RSU shares are sold, the broker issues a Form 1099-B. In many cases, brokers are prohibited from including the vesting-day compensation value in the reported cost basis so the 1099-B shows $0 or a blank. If users copy that number directly into their tax return, they report the full sale proceeds as a capital gain even though the original income was already taxed at vesting on the W-2. This means paying tax on the same dollars twice.

The fix: use the fair market value at vesting as the correct RSU cost basis. Adjust it on Form 8949 using Code “B” before transferring totals to Schedule D.

Mistake 3 — Forgetting Social Security and Medicare taxes

RSU income is subject to FICA taxes just like a salary. Social Security applies at 6.2% up to the $184,500 wage base in 2026. Medicare applies at 1.45% with no cap. High earners face an additional 0.9% Medicare surtax on income above $200,000 (single) or $250,000 (married filing jointly). These amounts are withheld at vesting but are often invisible on a pay stub.

Mistake 4 — Ignoring state income tax entirely

Users who relocate between states while RSUs vest can face multi-state tax obligations. California, for instance, can tax RSUs based on the percentage of the vesting period worked in-state even after someone moves away.

Mistake 5 — Missing estimated tax payment deadlines

After a large vesting event, users who do not adjust withholding may need to make quarterly estimated payments using Form 1040-ES. The 2026 deadlines are April 15, June 15, September 15, and January 15, 2027. Missing these deadlines can trigger IRS underpayment penalties on top of the tax bill itself.

When NOT to Rely Only on This RSU Tax Calculator

Transparency matters here. This RSU tax calculator provides a reliable estimate for most standard vesting scenarios but there are situations where professional tax guidance is essential.

Multiple RSU grants vesting in the same year Each grant may have a different vesting price and date. Stacking multiple events can push income into significantly higher tax brackets than a single-event calculation shows.

Private company RSUs — The fair market value is not a visible market price. It is determined by a 409A valuation, which may not reflect the eventual IPO or acquisition price. The tax calculation can change substantially at a liquidity event.

Alternative Minimum Tax (AMT) exposure — High earners with RSUs, ISOs, and other preference items may owe AMT. This calculator does not compute AMT liability.

Multi-state tax situations — Remote workers who live in one state and work in another, or who relocated during the vesting period, face apportionment rules that vary by state.

Large capital gains in the same year — The interaction between RSU income and capital gains can affect long-term capital gains rates, dividend tax rates, and IRMAA thresholds for Medicare premiums.

In any of these situations, a qualified CPA or enrolled agent familiar with equity compensation is worth the cost. The potential tax savings typically far outweigh the advisory fee.

Tips to Reduce Your RSU Tax Bill

Tip 1 — Max out 401(k) contributions in the vesting year

Increasing pre-tax 401(k) contributions reduces adjusted gross income, which can keep RSU income from pushing total earnings into a higher federal bracket. The 2026 contribution limit is $23,500 (under 50) or $31,000 (age 50 and over). The effect is modest but real especially when combined with other strategies.

Tip 2 — Adjust W-4 withholding after each vest

Submitting an updated Form W-4 to the employer’s payroll department after a vesting event is one of the simplest ways to close the withholding gap. Users can increase additional withholding on Line 4(c) to cover the estimated shortfall from RSU income.

Tip 3 — Make quarterly estimated tax payments

For users whose employer cannot adjust supplemental withholding, Form 1040-ES quarterly payments are the cleanest solution. The payment deadlines fall on April 15, June 15, September 15, and January 15. Paying close to the actual liability at each deadline avoids underpayment penalties entirely.

Tip 4 — Hold shares more than one year for long-term capital gains rates

After the shares vest and income tax is paid, holding the stock for at least one year and one day before selling means any price appreciation is taxed at long-term capital gains rates 0%, 15%, or 20% rather than ordinary income rates up to 37%. For a senior engineer in California, the difference between short-term and long-term treatment can be more than 20 percentage points.

Tip 5 — Use specific lot identification when selling

If RSUs have vested across multiple tranches with different prices, users can specify which lots to sell. Selling shares with the highest cost basis first minimizes the taxable capital gain. This requires notifying the broker in writing at the time of sale.

Tip 6 — Donate appreciated shares to charity

Shares that have appreciated since vesting can be donated to a qualified charity. Users receive a deduction equal to the current fair market value and avoid capital gains tax entirely on the appreciated portion. This strategy works best for shares held longer than one year.

How to Report RSUs on Your Tax Return

Reporting RSU income correctly requires pulling information from several forms. Here is the complete flow.

Form W-2 — The employer includes the fair market value of all vested RSUs in Box 1 (Total Wages). The taxes withheld at vesting appear in Box 2 (Federal Tax Withheld) and Box 4 (Social Security Tax). Most users do not need to add anything manually the W-2 handles this automatically.

Form 1099-B — When shares are sold (including a sell-to-cover at vesting), the broker reports the sale proceeds on Form 1099-B. Critically, the cost basis shown may be $0 or incomplete because brokers are often prohibited from including the vesting-day income already reported on the W-2.

Form 8949 — The Critical Step

Each sale of RSU shares is reported on Form 8949, Sales and Other Dispositions of Capital Assets. If the 1099-B shows an incorrect or missing cost basis, users must adjust it here using Code “B” in column (f). The correct RSU cost basis is the fair market value of the shares on the vest date.

Failing to make this adjustment is how users accidentally pay tax on RSUs twice — reporting a capital gain that includes income already taxed as wages.

Schedule D — The totals from Form 8949 flow here. Short-term gains appear in Part I, long-term gains in Part II. The net total then flows to Form 1040, Line 7.

The RSU sell-to-cover tax reporting follows the same path. When the employer sells shares at vesting to cover the withholding obligation, that sale appears on the 1099-B. Users must report it on Form 8949 with a cost basis equal to the vest-date FMV typically resulting in $0 or a minimal capital gain.

Frequently Asked Questions About RSU Taxes

How are RSUs taxed?

RSUs are taxed as ordinary income at the time of vesting. The fair market value of the shares on the vest date is added to the employee’s taxable income for that year and reported on Form W-2. Federal income tax, Social Security, Medicare, and applicable state taxes all apply. If the shares are later sold at a higher price, the gain is subject to capital gains tax.

Are RSUs taxed twice?

RSUs are not taxed twice when reported correctly. At vesting, the shares’ value is taxed as ordinary income on the W-2. At sale, only the price increase since vesting is taxed as a capital gain. The problem arises when Form 1099-B shows a $0 cost basis — if a user copies that number into their return without adjusting it on Form 8949, they pay tax on income already reported on their W-2. Using the correct RSU cost basis (the vest-date fair market value) prevents this.

What is the RSU withholding rate?

The federal RSU withholding rate is a flat 22% for supplemental wages under $1 million, per IRS Publication 15. For a single vesting event exceeding $1 million, the rate jumps to 37%. This flat rate is an IRS administrative default and does not reflect the employee’s actual marginal tax bracket. Most tech and finance employees earning above $105,700 in base salary are under-withheld from the first dollar of every vest.

Why are RSUs taxed so high?

RSUs are not taxed at a special rate — they are taxed as ordinary income, the same category as salary. The perception that RSU taxes are high comes from two factors. First, the vesting income stacks on top of base salary, pushing total earnings into higher federal brackets sometimes jumping from 22% to 32% or 35% in a single event. Second, FICA taxes (Social Security and Medicare) apply on top of income tax. For employees in high-tax states like California or New York, the combined marginal rate can exceed 50% on the day RSUs vest.

How do I report RSUs on my tax return?

RSU income at vesting is automatically included in Box 1 of the W-2, so no separate entry is needed for the vesting event itself. When shares are sold, users report each sale on Form 8949 using information from the broker’s Form 1099-B. If the 1099-B shows an incorrect or missing cost basis, users must adjust it on Form 8949 to reflect the fair market value at vesting. The totals then transfer to Schedule D and finally to Form 1040.

Share Your Experience

Has an RSU vesting event ever caught users off guard at tax time? A lot of people from first-time equity recipients to experienced tech employees discover the withholding gap the hard way, in April, when the IRS bill arrives.

Dropping a comment below with the experience which state, what the gap looked like, how it was handled helps other readers plan better. This community of equity compensation learners is one of the most practical resources available, and real stories add context that no calculator alone can provide.

How This Article Was Created

This article draws on verified 2026 IRS figures from IRS Revenue Procedure 2025-32 and IRS Publication 15 (Circular E), equity compensation reporting guidance from Charles Schwab and Fidelity’s stock plan services, and tax return reporting frameworks published by the IRS for Form 8949 and Schedule D. All dollar figures and tax rates reflect the 2026 tax year. This content is for educational purposes only and does not constitute tax advice. Readers with complex RSU situations multiple grants, private company stock, multi-state vesting, or AMT exposure should consult a qualified CPA or enrolled agent.