RSU Vesting Tax Calculator
The vest, the withholding and the gap
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Planning indicator only. It does not assess every part of a household's finances or replace individualized professional advice.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the number of shares vesting on this date and the closing price on that date. The product is ordinary wage income — it lands in Box 1 of your W-2 exactly like salary.
- 02
Enter the wages this employer has already paid you this calendar year. That is what decides how much of the vest still carries Social Security, and whether the Additional Medicare Tax has started.
- 03
Enter your REAL top federal bracket, not the 22% payroll will withhold. The gap between the two is the whole reason the page exists.
- 04
Add your state supplemental withholding rate — zero in the nine states with no wage income tax, 10.23% in California on bonuses and options — then, if you plan to hold rather than sell, the price you expect to sell at, the months you would hold and your long-term capital gains rate.
- 05
Read the shares sell-to-cover takes, then the shortfall against your bracket, then the schedule underneath: what the flat rate does at 22%, 24%, 32%, 35% and 37% on the same vest.
Formula
Ordinary wage income at vest = shares × the closing price on the vesting date. This is Box 1 of your W-2. Federal withholding = the flat 22% supplemental rate on that amount, until aggregate supplemental wages for the calendar year pass $1,000,000, above which 37% is mandatory on the excess and cannot be elected out of. FICA = 6.2% on whatever part of the vest still fits under the $184,500 wage base given wages already paid, + 1.45% Medicare on all of it, + 0.9% Additional Medicare Tax on the part that carries wages past $200,000 from this employer. State withholding = the vest × your state supplemental rate. Shares sold to cover = total withholding ÷ the vest price, ROUNDED UP, with the difference returned as cash. Shares kept = shares vesting − shares sold. The shortfall = withholding at the flat rate − (vest value × your real marginal rate). Cost basis = the vest price per share, and the holding period starts on the vesting date; gain on a later sale = (sale price − vest price) × shares kept, taxed at your long-term rate past twelve months and at your ordinary rate before then.
Example
400 shares vesting at $68, on top of $145,000 of wages already paid this year, at a real 32% bracket with no state wage tax. The vest is $27,200 of ordinary income. Payroll withholds $5,984 federal at the flat 22%; Social Security takes $1,686 (the whole vest still fits under the $184,500 base, which had $39,500 of room left) and Medicare takes $394, for $2,081 of FICA. Total withholding is $8,065 — 29.7% of the vest. Sell-to-cover sells 119 shares at $68 to raise $8,092, returning $27 of change, and you keep 281 shares worth $19,108. Now the gap: at 32% the real federal tax on $27,200 is $8,704 against $5,984 withheld, so you are $2,720 short on this vest alone and it is due when you file. The schedule prices the same vest at every bracket — level at 22%, $544 short at 24%, $2,720 short at 32%, $3,536 at 35% and $4,080 at 37%. Your basis is $68 a share and the twelve-month clock starts today; a broker reporting that basis as zero would cost you $4,080 of tax on money already taxed as wages.
Definitions
- Restricted stock unit
- An unfunded promise to deliver shares on a future date. No property exists until it vests, which is why no 83(b) election is available on one.
- Supplemental wages
- Bonuses, commissions, severance and equity vests. Withheld at a flat 22% for 2026, mandatory at 37% above $1,000,000 of supplemental wages for the year.
- Sell-to-cover
- Selling part of a vest on the open market to fund the withholding. Rounds up to a whole share, so a small cash balance usually comes back to you.
- Cost basis
- The vest-date fair market value, on which you have already paid ordinary income tax. Adjust it on Form 8949 when a 1099-B reports zero, or you pay tax twice.
- Net settlement
- The alternative to a market sale: the company issues fewer shares and remits the withholding itself. Identical tax, fewer shares, no trade.
Good to know
A vest is wages, and nothing else
On the vesting date, the fair market value of the shares becomes ordinary compensation under section 83(a). It lands in Box 1 of your W-2 alongside your salary, it is subject to income tax withholding, and it carries Social Security and Medicare in full. There is no capital-gains treatment at vest at all, however many years the grant has been outstanding and however much the price has risen since. 400 shares vesting at $68 is $27,200 of wage income, taxed exactly as a $27,200 salary increase would be. Everything that happens to the share price after that day is a separate capital transaction, from a cost basis equal to the same $27,200. That single sentence resolves most of the confusion around RSUs, and it has two consequences people find surprising. The first is that the tax is due whether or not you sell — the income arises on delivery of the shares, not on any sale, which is why some mechanism has to fund the withholding on the day. The second is that a vest is one of the very few forms of income where the amount you owe is set by a price you do not choose and cannot control: the closing price on the vesting date. A stock that halves the week after a vest still leaves you taxed on the higher figure, and the loss that follows is a capital loss deductible against capital gains and $3,000 a year of ordinary income, not a reduction in the wages already reported. That asymmetry is the strongest structural argument for selling at vest, and it has nothing to do with any view about the company.
22% is a withholding rate, not a tax rate
This one confusion produces more unexpected April bills than anything else in equity compensation. The flat 22% payroll applies to a vest is the optional flat rate for SUPPLEMENTAL WAGES, and it is a payroll convention rather than a statement about your liability. It stays at 22% until aggregate supplemental wages for the calendar year pass $1,000,000 — a statutory threshold that has never been indexed — above which 37% becomes mandatory on the excess and neither the employer nor the employee can elect out. Someone in the 32% bracket is therefore under-withheld by ten points of the entire vest, and someone at 35% by thirteen. On a $27,200 vest at a 32% bracket, payroll withholds $5,984 while the real federal tax is $8,704: you are $2,720 short on one vest, and payroll has done nothing wrong. Multiply that by four vests a year and the shortfall is a five-figure problem. Three fixes exist and two of them reliably work. Asking payroll to withhold at a higher supplemental rate is worth trying but the flat rate is the employer's election rather than yours, so many plans simply will not. An estimated payment for the quarter the vest falls in stops the underpayment penalty running from that date. Extra withholding on Form W-4 line 4(c) is the tidiest of the three, because withholding is treated as paid evenly across the year however late in the year it actually goes in — so December withholding can cure a first-quarter shortfall, which an estimated payment cannot. Either route is worth taking, because the underpayment penalty is charged on the shortfall for the period it was outstanding, and the usual safe harbours are 90% of the current year's tax or 100% of last year's, rising to 110% of last year's where your prior-year adjusted gross income was above $150,000.
How the withholding is funded, and the basis you must write down
Three mechanics fund the tax and the choice is usually made by the plan rather than by you. SELL-TO-COVER sells just enough shares on the open market on or about the vest date: $8,065 of total withholding at $68 a share needs 119 shares, always rounded up, so $27 of change comes back to you and 281 shares remain, worth $19,108. NET SETTLEMENT has the company simply issue fewer shares and remit the withholding itself, with no market trade at all — cleaner, and common at companies that do not want employees selling into thin markets. CASH TRANSFER has you wire the withholding and keep every share, which is the only route that preserves the full position. The tax is identical under all three; only the number of shares you end up holding changes. Now the part that costs real money if you skip it. Your cost basis is $68 a share, the vest price, because you have already paid ordinary income tax on that value. Brokers routinely report RSU sales on Form 1099-B with a basis of zero or with the basis box left blank, because the broker often does not know what the employer reported. Anyone who copies that figure onto a return pays full tax a second time on money already taxed as wages — on this vest, $4,080 at a 15% long-term rate, and considerably more at ordinary rates. The correction goes on Form 8949 with the adjusted basis, and it is entirely routine, but it only happens if you know to look. Keep the vest confirmation. It is the only document that states the number, and brokerage statements are not a substitute for it.
The clock, the election that does not exist, and the question after the tax question
The capital-gains holding period starts at VESTING and never at grant. A share sold on the vesting day has been held for zero days and shows essentially no gain, which is exactly why selling immediately carries no tax cost — the basis and the price are the same number. Holding twelve months from the VEST date is what converts subsequent appreciation from ordinary rates to long-term capital gains rates; twelve months from the grant date buys nothing whatever. And a section 83(b) election is not available on an RSU. That election accelerates tax on a transfer of PROPERTY subject to a substantial risk of forfeiture, and an RSU is an unfunded, unsecured promise to deliver shares later, so no property has been transferred and there is nothing to elect on. 83(b) belongs to restricted stock AWARDS — actual shares issued up front with a vesting condition attached — which are a different instrument that happens to share three letters. Confusing the two costs people the thirty-day election deadline on the awards they actually hold. State tax adds one more layer that cannot be reduced to a single rate. New York allocates vest income by the fraction of workdays spent in New York over the grant-to-vest period under TSB-M-07(7)I, so someone who moved away two years ago can still owe New York on shares vesting today; California withholds a flat 10.23% on bonuses and stock options and 6.6% on other supplemental wages; nine states levy nothing on wage income at all. Anyone who has moved between grant and vest should check both states. Then the question after the tax question: you now hold $19,108 of stock in the company that also pays your salary and probably your health insurance, so a bad year there hits your income and your savings simultaneously. If that $19,108 arrived as cash tomorrow, would you buy this stock with it? Where the answer is no, the shares are being held by inertia rather than by a decision.
Frequently asked questions
How are RSUs taxed when they vest?
As ordinary wages, under section 83(a), on the vesting date. The fair market value of the shares that day is compensation: it goes in Box 1 of your W-2 alongside your salary, it is subject to income tax withholding, and it carries Social Security and Medicare in full. There is no capital-gains treatment at vest at all, however long the grant has been outstanding. Everything the share price does after that day is a separate capital transaction from a basis equal to the same figure.
Why do I owe more tax than payroll withheld?
Because 22% is a withholding convention for supplemental wages, not your tax rate. On a 400-share vest at $68 — $27,200 of income — payroll withholds $5,984 at the flat rate, but at a 32% bracket the real federal tax on that money is $8,704. You are $2,720 short on one vest, and payroll has done nothing wrong: the flat rate is what the regulations permit, and it is simply not your rate. At a 35% bracket the same vest is $3,536 short, and at 37% it is $4,080.
How do I close the shortfall before April?
Three ways, and only two of them reliably work. Ask payroll to withhold at a higher supplemental rate — many plans allow it, many do not, because the flat rate is the employer's election rather than yours. Make an estimated payment for the quarter the vest falls in, which stops the underpayment penalty running from that date. Or add extra withholding to your salary on Form W-4 line 4(c), which is the tidiest of the three: withholding is treated as paid evenly across the year however late in the year it actually goes in, so December withholding can cure a first-quarter shortfall. What does not work is waiting to see what happens.
What is sell-to-cover, and are there alternatives?
Sell-to-cover sells just enough of the vested shares on the open market to raise the withholding. On a 400-share vest at $68 with $8,065 of total withholding it sells 119 shares — always rounded up, so $27 of change comes back to you — and you keep 281 shares worth $19,108. Two other mechanics exist: NET SETTLEMENT, where the company simply issues fewer shares and no market sale happens at all, and CASH TRANSFER, where you wire the withholding and keep every share. The tax is identical under all three. Only the number of shares you end up holding changes.
What is my cost basis, and why does it matter so much?
The vest price — $68 a share here — because you have already paid ordinary income tax on that value. Write it down, because brokers routinely report RSU sales on Form 1099-B with a basis of zero or with the basis box left blank, and anyone who copies that figure onto a return pays full tax a second time on money already taxed as wages. The fix is Form 8949, adjusting the reported basis to the vest price. On this vest that adjustment is worth $4,080 of tax if you sold the whole lot.
Can I make an 83(b) election on RSUs?
No. A section 83(b) election accelerates tax on a transfer of PROPERTY subject to a substantial risk of forfeiture. An RSU is an unfunded, unsecured promise to deliver shares later — no property has been transferred, so there is nothing to elect on and no election to file. 83(b) belongs to restricted stock AWARDS, which are actual shares issued up front with a vesting condition attached. They are a different instrument that happens to share three letters, and confusing the two costs people the election deadline on the awards they do hold.
When does the capital gains clock start?
At vesting, never at grant. A share sold on the vesting day has been held for zero days and shows essentially no gain, which is exactly why selling immediately is the low-risk default — there is no tax cost to it, because the basis and the price are the same number. Holding twelve months from the vest date is what converts any subsequent appreciation from ordinary rates to long-term capital gains rates. Twelve months from the GRANT date buys you nothing at all.
Do RSUs carry Social Security and Medicare?
In full, like any other wages. On a $27,200 vest stacked on $145,000 of wages already paid, that is $1,686 of Social Security and $394 of Medicare — $2,081 in total. Timing matters more than people expect: Social Security stops at $184,500 of wages for the year, so a December vest for someone who has already cleared the base carries no 6.2% at all, while the same vest in February carries the lot. Medicare never stops, and the 0.9% Additional Medicare Tax begins once one employer has paid you more than $200,000.
Should I hold the shares or sell them?
That is a concentration question rather than a tax one, because selling at vest costs nothing in tax. You are holding stock in the company that also pays your salary and, most likely, your health insurance — so a bad year there hits your income and your savings at the same time. The test that cuts through it: if that $19,108 arrived as cash tomorrow, would you buy this stock with it? Where the answer is no, the shares are being held by inertia rather than by a decision.