RSU Tax Calculator

How the RSU tax is calculated

The calculator treats your vest as ordinary wage income and layers on each tax the way payroll and the IRS actually do. The core math is:

Vest value (ordinary income) = shares × price at vest
Federal income tax owed      = tax(other income + vest) − tax(other income)
Federal tax withheld         = 22% × vest   (37% on any part above $1M)
Withholding shortfall        = tax owed − tax withheld     ← set this aside
Social Security              = 6.2% × vest, only up to the $184,500 wage base
Medicare                     = 1.45% × vest  (+ 0.9% surtax above the threshold)
State tax                    = your estimated state rate × vest
Net value kept               = vest value − all taxes above

Federal income tax is computed incrementally — the vest is stacked on top of your other income and taxed at the brackets it actually reaches, not by multiplying the whole vest by one flat rate. That is why entering your salary matters: it sets the correct marginal bracket. Everything runs in your browser — there is no login, no account, and nothing you enter is stored or sent anywhere. A shared result lives only in the page URL.

How RSUs are taxed at vesting

Restricted stock units have no tax at grant. The taxable event is vesting: on the day shares vest, their full fair market value (shares × price) becomes ordinary compensation income, reported on your W-2 alongside your salary. It is also subject to Social Security and Medicare payroll taxes, exactly like a cash bonus. Because it is wages — not investment income — the vest itself is never subject to capital gains tax or the net investment income tax. Those only come into play later, if you hold the shares and the price changes.

The 22% withholding problem: why you may owe more in April

The IRS lets employers withhold federal income tax on supplemental wages like RSUs at a flat 22%, and most large companies do exactly that for simplicity. The catch: 22% is often far below a high earner's real marginal rate of 32%, 35%, or 37%. Payroll withholds 22%, you owe 35%, and the 13-point gap quietly becomes a balance due at filing. This is the single most common reason RSU holders get a surprise tax bill — and the number this calculator is built to show you in dollars so you can set it aside now. Note the rule flips above $1,000,000 of supplemental wages in a year: the excess must be withheld at 37%.

RSU cost basis: why your 1099-B may show $0 and double-tax you

This is the most expensive, most common RSU mistake — read it carefully. When your RSUs vest, you are taxed on the full value as income, and that value becomes your cost basis. If 1,000 shares vest at $50, you paid tax on $50,000 and your basis is $50 per share. When you later sell, you should owe capital gains tax only on the gain above $50.

The problem: many brokerage 1099-B forms report a cost basis of $0 (or only what you literally paid, which for RSUs is nothing). If you file that as-is, the IRS taxes the entire sale price as gain — so you pay tax a second time on income you already paid tax on at vesting. The fix is to correct the basis on Form 8949 to the vest-date fair market value (your broker's supplemental statement usually lists it). Do this and you are taxed once, correctly. Skip it and a routine sale can cost you thousands in tax you never owed. Estimate the real gain with our capital gains tax calculator using the correct vest-date basis.

Sell-to-cover vs cash payment vs net share settlement

Something has to pay the tax withholding on your vest, and there are three common methods. Sell-to-cover (the default at most employers) sells just enough of the newly vested shares to cover withholding and leaves you the rest — the calculator shows how many shares that is and how many you keep. Net share settlement is similar but the company simply holds back shares instead of selling them on the market. Cash payment lets you pay the withholding from your own cash and keep every share, which makes sense only if you deliberately want more exposure to your employer's stock. All three cover the same 22% withholding — so all three can still leave the shortfall above.

Should you sell RSUs immediately at vest or hold?

Selling at vest is the tax-neutral default: you have already paid ordinary income tax on the full value, your basis equals the current price, so selling right away produces almost no additional gain or tax. Holding is a separate investment decision — you are choosing to keep a concentrated position in one company's stock. If you hold more than a year, future appreciation is taxed at lower long-term capital gains rates rather than short-term rates, but you also carry the risk the stock falls. Turn on "Model what happens if I hold" above to see the short-term vs long-term difference for your own numbers.

RSU tax in California, New York, Texas, and Washington

RSUs concentrate in tech hubs, and the state you live in can swing your total tax dramatically. California taxes vest income as ordinary wages at rates up to 13.3% and requires supplemental state withholding — a high earner can face a combined federal-plus-state rate well over 40%. It also taxes the share of a grant earned while you worked in the state, even after you move. New York similarly taxes RSUs as wages at rates up to ~10.9% and allocates multi-year grants to New York workdays. Texas and Washington have no wage income tax, so an RSU vest is not taxed at the state level in either — though Washington levies a separate tax on large long-term capital gains that can hit a later sale (not the vest). Set your state above to fold an estimated rate into the result.

What happens to RSUs if you leave the company before vesting

You keep only what has already vested. Unvested RSUs are almost always forfeited the day you leave — whether you quit or are let go — because vesting is contingent on continued employment. Since vesting is the taxable event, forfeited units are never taxed: you never received the shares, so there is nothing to report. Already- vested shares are yours to keep (you were taxed when they vested). Grant agreements occasionally include acceleration on acquisition, death, or disability, so always check your specific terms and vesting schedule before making a move.

Double-trigger RSUs at private companies and IPO vesting

At private companies, RSUs often carry a double-trigger: they vest (trigger one) but are not actually delivered or taxed until a liquidity event like an IPO or acquisition (trigger two). That design avoids taxing you on illiquid shares you cannot sell. The consequence is that when the company goes public, a large batch of RSUs can settle all at once — sometimes years of grants — creating a single enormous vest and a correspondingly large 22% withholding gap in that year. If you have double-trigger RSUs approaching an IPO, model the full settled value here and plan for the shortfall well ahead of the lockup expiring. Our tech comp optimizer helps you see the multi-year picture of a grant.

RSUs vs stock options: how the tax treatment differs

RSUs and stock options are taxed very differently. An RSU has real value the moment it vests, so it is taxed as ordinary income on that full value automatically — you cannot choose the timing. Stock options (ISOs and NSOs) give you the right to buy at a fixed strike price, and the tax turns on when you exercise, not when they vest — NSOs tax the spread as ordinary income at exercise, while ISOs can qualify for capital gains treatment but may trigger the alternative minimum tax. RSUs are simpler and never worthless as long as the stock has any value; options are riskier but offer more timing control. If your equity is a stock purchase plan instead, use our ESPP calculator.

Estimated tax payments and safe harbor after a large vest

A big vest that is under-withheld can trigger an IRS underpayment penalty even if you pay the balance in full by April. You avoid the penalty by meeting a safe harbor: pay, through withholding and estimated payments, at least 90% of this year's total tax or 100% of last year's (110% if your prior-year AGI topped $150,000). The practical move is to send a quarterly estimated payment for the shortfall this calculator shows, or ask payroll to withhold extra from a later paycheck. Setting the shortfall aside the moment shares vest keeps that money ready instead of spent.

Do you pay tax twice on RSUs?

No — but the cost-basis trap above makes it look like you do. You are taxed once, as ordinary income, when the shares vest. When you sell, you owe tax only on the additional gain above the vest-date value, because that value is your cost basis. The only way people genuinely get taxed twice is by accident: filing a 1099-B that shows a $0 basis, which re-taxes the already-taxed vest income as if it were all gain. Correct the basis on Form 8949 and you pay exactly once, as intended.