RSU tax calculator

How RSU taxes work

When restricted stock units (RSUs) vest, the full fair market value of the shares is treated as ordinary income in that year, exactly like salary. It does not matter whether you sell the shares or hold them - the value at vest is taxable income, and your employer reports it on your W-2. This RSU tax calculator estimates how much is withheld at vest so you can see your net and plan for any shortfall.

The trap for high earners is the federal supplemental withholding rate. By default, employers withhold federal tax on equity at a flat 22% (rising to 37% on supplemental wages above $1 million in a single year). If your marginal tax bracket is 32%, 35%, or 37%, that flat 22% is far too low - and the difference becomes a bill when you file.

The four components of RSU withholding

Your RSU vest is reduced by four separate taxes, and this calculator breaks out each one:

• Federal income tax at the 22% supplemental rate (37% above $1M of supplemental wages for the year).
• State income tax at your state’s supplemental rate. This varies widely - California withholds 10.23% on stock, while Texas and Washington have no state income tax at all.
• Social Security at 6.2%, but only until your total wages reach the annual wage base, which is $184,500 for 2026. If you have already earned above that, no further Social Security is withheld on the vest.
• Medicare at 1.45% on all wages, plus an additional 0.9% on wages above $200,000 - which most RSU recipients at this income level will owe.

Worked example

Suppose $120,000 of RSUs vest in California, and you have already earned $200,000 in wages this year:

• Federal (22%): $26,400
• California (10.23%): $12,276
• Social Security: $0 - you are already over the $184,500 wage base
• Medicare (1.45% + 0.9%): $2,820
• Total withheld: $41,496, an effective rate of about 34.6%
• Net to you: $78,504

Now compare that 34.6% effective withholding to a 35% or 37% marginal bracket. The gap looks small here because California’s high state rate fills most of it - but in a no-income-tax state like Texas, the same vest would withhold only ~24% federal-plus-Medicare, leaving a much larger shortfall at tax time.

The 22% under-withholding trap

Because the federal flat rate sits well below the top brackets, a six-figure vest can leave you owing thousands in April even though “taxes were taken out.” This is the single most common surprise for employees with equity comp. The shortfall is largest when:

• You live in a low- or no-income-tax state (less state withholding to cushion the federal gap), and
• Your total income pushes the vest into the 35% or 37% federal bracket.

How to fix the gap

There are three standard ways high earners close the under-withholding gap:

1. Quarterly estimated payments. Calculate the difference between the 22% withheld and your true marginal rate, and send it to the IRS each quarter to avoid an underpayment penalty.
2. Extra paycheck withholding. Use a W-4 adjustment to withhold additional federal tax from your regular salary across the year.
3. Sell-to-cover, then top up. Most plans automatically sell shares to cover the 22%; you simply add the remaining marginal difference yourself.

Use the effective rate this calculator shows versus your real marginal rate to size exactly how much to set aside.

Cost basis and the “double tax” myth

A frequent worry is being taxed twice on RSUs. You are not. The value at vest becomes your cost basis. If you later sell for more, only the gain above that basis is taxed again - as a capital gain. If you sell immediately at vest, there is essentially no further gain and no second tax. The mistake to avoid is letting your broker report a $0 cost basis on the 1099-B, which would double-tax the vested amount; confirm the basis equals the vest-date value.

RSUs versus other equity compensation

RSUs are the simplest equity type because they are taxed as ordinary income at a known date. Other forms behave differently and are worth modeling separately:

• Incentive stock options (ISOs) can trigger the alternative minimum tax when exercised and held - see the AMT / ISO calculator.
• Non-qualified stock options (NSOs) are taxed on the spread at exercise, similar to RSUs.
• ESPP shares are bought at a discount, and the tax split depends on your holding period.

If you receive several of these, estimate each one and add them together to see your full equity tax picture for the year.

Common mistakes to avoid

• Assuming the 22% withheld is your final tax - it usually is not.
• Forgetting the extra 0.9% Medicare surtax above $200,000.
• Holding concentrated employer stock purely to “save on taxes” - the tax is already paid at vest, so holding is an investment decision, not a tax one.
• Reporting a $0 cost basis at sale and paying tax twice.