RSU Tax Withholding Estimator
RSU tax withholding calculator. 22%/37% federal supplemental rate, state + FICA, sell-to-cover shares, and the under-withholding gap.
RSU Tax Withholding Calculator
When RSUs vest, the value is taxed as ordinary income and your employer typically withholds shares to cover it (sell-to- cover). Federal withholding uses the flat 22% supplemental-wage rate (rising to 37% on supplemental pay over $1M for the year). This calculator shows the tax withheld, how many shares are sold to cover it, what you keep — and whether 22% is likely to under-withhold for your bracket.
How to Use the RSU Withholding Calculator
Enter shares and vest price
The number of RSUs vesting and the stock's price on the vest date. Their product is the value taxed as ordinary income on that date.
Add year-to-date supplemental pay
If your bonuses and prior vests this year already exceed $1M, the excess is withheld at the higher 37% mandatory rate. Most people leave this at zero.
Set state rate and FICA
Enter your state withholding rate (0 if your state has no income tax). Keep FICA at 7.65% unless you've already hit the Social Security wage cap, in which case pick "Medicare only".
Check the under-withholding warning
Enter your true marginal federal rate. If it's above 22%, the flat withholding leaves a gap you'll owe at filing — the tool estimates how much to set aside.
How RSU Taxation Works
Vesting Is the Taxable Event
Restricted stock units have no tax consequence when granted — only when they vest. At vest, the full market value of the shares is treated as ordinary income, exactly like salary, and reported on your W-2. It doesn't matter whether you sell or hold; the tax is owed on the value the day they vest. This is the single most misunderstood fact about RSUs, and it's why a vest can land you with a tax bill even though you never sold a share.
The 22% Flat Rate and Sell-to-Cover
Because a vest is "supplemental wages," your employer withholds federal tax at the flat statutory rate of 22% (jumping to 37% on any supplemental pay above $1M in a year). To pay this, most companies use sell-to-cover: they automatically sell just enough of the vesting shares to cover the withholding and hand you the rest. So if 500 shares vest, you might only keep ~330 — the others are sold to satisfy federal, state, and FICA withholding.
"The 22% flat rate isn't your tax rate — it's a withholding default. If your real marginal rate is 32% or 35%, the gap is a bill waiting for you in April."
The Under-Withholding Trap
The 22% flat withholding rate is the heart of the RSU tax problem. If your marginal federal bracket is 32%, 35%, or 37%, withholding only 22% means you're under-withheld by 10–15 percentage points on the entire vest. The shortfall doesn't disappear — it shows up as a balance due when you file, sometimes with an underpayment penalty. High earners with large vests should plan for this: set aside the gap, make estimated payments, or ask payroll to withhold extra. The calculator above estimates the shortfall when you enter your true marginal rate.
The Second Tax: Selling Later
Once shares vest, your cost basis is the vest-date price (the amount already taxed as income). If you later sell, only the change in price since vesting is a capital gain or loss — short-term if held under a year, long-term if held longer. A common, costly mistake is double-counting: paying income tax at vest, then mistakenly reporting the full sale price as a gain. You only owe capital-gains tax on the appreciation after vesting.
10 Facts About RSU Taxation
RSUs are taxed at vest, not grant — as ordinary income.
Federal withholding is a flat 22% supplemental-wage rate.
Supplemental pay over $1M/yr is withheld at 37%.
Sell-to-cover sells shares automatically to pay the tax.
22% often under-withholds high earners — expect a April bill.
You owe tax at vest even if you don't sell.
Your cost basis is the vest-date price already taxed.
Later gains are capital gains on appreciation only.
FICA applies — Social Security caps at the annual wage base.
Double-counting basis is a common, costly filing error.
Frequently Asked Questions
- RSUs are taxed when they vest, not when they're granted. At vest, the full market value of the shares is ordinary income reported on your W-2 — taxed exactly like salary. You owe this tax whether or not you sell any shares. If you sell later, any price change since the vest date is a separate capital gain or loss.
- A vest is "supplemental wages" under IRS rules, so employers withhold federal tax at the flat statutory supplemental rate of 22% (rising to 37% on supplemental pay over $1M in a year). That 22% is a withholding default, not your actual tax rate. If your marginal bracket is higher, 22% under-withholds and you'll owe the difference at filing.
- Sell-to-cover is the most common way employers pay the withholding on a vest. They automatically sell just enough of the vesting shares to cover federal, state, and FICA withholding, and deposit the remaining shares in your account. So if 500 shares vest and the tax requires selling 170, you keep 330. The calculator shows both numbers.
- Often, yes. If your marginal federal rate is above the 22% flat withholding rate — common for anyone in the 32%, 35%, or 37% bracket — the vest is under-withheld and you'll owe the gap when you file. Enter your true marginal rate in the calculator and it estimates the shortfall to set aside. Large under-withholding can also trigger an estimated-tax penalty.
- Only on the change in price since vesting. Your cost basis is the vest-date value (already taxed as income). If you sell higher, the appreciation is a capital gain — short-term if held under a year, long-term if held longer. If you sell at the vest price, there's essentially no further tax. A frequent error is reporting the whole sale price as a gain and paying tax twice.
- Yes. A vest is wages, so Social Security (6.2%, up to the annual wage base) and Medicare (1.45%, plus an extra 0.9% on high incomes) both apply. If you've already earned past the Social Security wage base for the year, only the 1.45% Medicare applies to the vest — select "Medicare only" in the calculator to reflect that.
- The mandatory 37% federal rate applies to supplemental wages above $1,000,000 in a calendar year. Supplemental wages include bonuses, commissions, and RSU vests. Up to $1M is withheld at the 22% flat rate; only the portion above $1M is withheld at 37%. Enter your year-to-date supplemental pay so the calculator splits the vest across both tiers correctly.
- Plan for the gap between 22% withholding and your real rate. Options: set aside the estimated shortfall in cash, make quarterly estimated tax payments, increase withholding on your regular paycheck via Form W-4, or ask payroll whether they can withhold at a higher supplemental rate. The calculator's warning estimates the amount; a tax adviser can help structure the payments.
- That's a personal decision, not tax advice. Since you're already taxed at vest, selling immediately incurs little or no additional tax (no appreciation yet) and diversifies you away from concentrating wealth in one employer's stock. Holding bets on the stock rising but adds risk and a future capital-gains decision. Many advisers suggest selling vested RSUs by default and reinvesting elsewhere, but weigh your own situation.
- No. It's an estimate of statutory withholding using flat supplemental rates, standard FICA, and a state rate you enter. Real withholding can differ based on your employer's payroll setup, the Social Security wage base, additional Medicare tax, and state rules. Use it to plan, but consult a tax professional for your actual liability.
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