RSU Tax Calculator
Restricted stock units are taxed as ordinary income at vesting, but the flat 22% withholding rarely covers your actual tax bill. Use this calculator to see your real federal and state tax liability, the withholding gap, net shares after sell-to-cover, and how an RSA Section 83(b) election compares.
Expected annual stock price appreciation
Your base salary and other W-2 income (excluding RSU income)
How your company covers the tax withholding
Most companies withhold at the flat 22% supplemental rate
Two taxable events: vesting and selling
RSUs are taxed twice, at two different moments, under two different rules — and mixing them up is the source of most RSU tax surprises.
- At vesting — ordinary income. The full fair market value of the shares on the vest date is added to your W-2 wages and taxed as ordinary income, plus Social Security (6.2% to the $176,100 2025 wage base), Medicare (1.45% + 0.9% surtax over $200k single / $250k joint). You owe this whether or not you sell.
- At selling — capital gain or loss. Your cost basis is the vest-date value already taxed as income. Only the change in price since vesting is a capital gain (long-term if you hold more than a year after vest, otherwise short-term).
Why the 22% withholding leaves you with a bill
Employers withhold federal tax on RSU income at the flat supplemental rate of 22% (37% on amounts over $1 million in a year). If your marginal rate is 32%, 35%, or 37%, that 22% under-withholds badly — and the gap lands as a balance due at filing, often with an underpayment penalty on top.
Worked example: $100,000 of RSUs vest, 35% marginal bracket
- Ordinary income added to W-2: $100,000
- Employer withholds 22% federal: $22,000
- Actual federal tax at 35%: $35,000
- Withholding gap you must cover at filing: $13,000 (before state tax and the Medicare surtax)
Fix it by making a quarterly estimated payment for the gap, or by asking payroll to withhold extra. Sell-to-cover only covers the 22% default, not your true rate.
The cost-basis double-tax trap
This is the most expensive RSU mistake. When you sell vested shares, your broker's 1099-B often shows a cost basis of $0 — because the broker did not receive the compensation income figure. If you report it as-is, you pay capital gains tax on the entire sale price, even though the vest-date value was already taxed as ordinary income on your W-2.
The correct basis is the fair market value on the vesting date. On Form 8949 you adjust the basis up to that value, so you are only taxed on the gain since vesting. Sell immediately at vest and the capital gain is roughly zero — the whole value was already taxed as income.
RSUs vs RSAs and the 83(b) election
A Section 83(b) election lets you pay tax at grant instead of vesting — but it only applies to restricted stock awards (RSAs), where shares are issued up front subject to forfeiture. RSUs are a promise of future shares, so there is nothing to make an 83(b) election on; you are taxed at vesting, period.
For RSAs at an early-stage company, an 83(b) filed within 30 days of grant can lock in tax on a tiny grant-date value and convert all later appreciation to capital gain. The risk: if the shares fall or you forfeit them, the tax you prepaid is not refundable.
Planning levers
Cover the withholding gap
Set aside the difference between your marginal rate and 22% at each vest, or pay it as estimated tax, to avoid a filing-season shock and penalties.
Sell at vest to diversify
Since vesting is already taxed, selling immediately creates little or no extra capital gain and reduces single-stock concentration risk.
Max pre-tax accounts
401(k) and HSA contributions lower the AGI that a big vest inflates, which can also protect income-based deductions and credits.
Hold winners a year, harvest losers
Holding more than a year after vest qualifies gains for long-term rates; harvesting losses on other holdings offsets gains when you do sell.
Frequently asked questions
How are RSUs taxed?
RSUs are taxed as ordinary income when they vest. The fair market value of the shares on the vesting date is added to your W-2 income and subject to federal income tax, state income tax, Social Security tax (up to the wage base), and Medicare tax. If the total vesting value is large, the additional 0.9% Medicare surtax may also apply. Any gain or loss after vesting is treated as a capital gain or loss when you eventually sell the shares.
Why do I owe extra tax after my RSUs vest?
Most employers withhold a flat 22% for federal tax on RSU income (37% for amounts over $1 million). If your marginal tax rate is higher than 22%, the withholding is not enough to cover your actual liability. This creates a withholding gap that results in a tax bill when you file your return. State taxes, the additional Medicare surtax, and the loss of deductions or credits due to higher AGI can widen the gap further.
What is sell-to-cover for RSUs?
Sell-to-cover is the most common method employers use to handle RSU tax withholding. When your RSUs vest, the company automatically sells enough shares to cover the estimated tax withholding and delivers the remaining shares to you. For example, if 100 shares vest and the withholding requirement is 40%, approximately 40 shares are sold and you receive 60 shares. The exact number depends on the share price and the combined federal, state, and FICA withholding rates.
What is a Section 83(b) election?
A Section 83(b) election allows you to pay tax on restricted stock awards (RSAs) at the time of grant rather than at vesting. You must file the election with the IRS within 30 days of the grant date. If the stock price increases between grant and vesting, you pay tax on the lower grant-date value and any subsequent appreciation is taxed as a capital gain. However, if the stock price drops or you forfeit the shares, you cannot recover the tax already paid. The 83(b) election applies to RSAs, not to RSUs.
Do I pay Social Security tax on RSU income?
Yes, RSU income is subject to Social Security tax (6.2%) up to the annual wage base ($176,100 for 2025). If your regular salary already exceeds the wage base before your RSUs vest, no additional Social Security tax applies to the RSU income. If your salary is below the wage base, RSU income will be taxed for Social Security until the combined total reaches the cap. Medicare tax (1.45%) applies to all RSU income with no cap, and the additional 0.9% Medicare surtax applies to earnings above $200,000 for single filers or $250,000 for married filing jointly.
How do I reduce tax on RSUs?
There is no way to avoid ordinary income tax on RSU vesting, but you can manage the impact. Strategies include maximizing pre-tax 401(k) contributions to lower your taxable income, donating appreciated shares to charity to avoid capital gains, harvesting capital losses to offset gains from selling vested shares, timing share sales to qualify for long-term capital gains rates (hold for more than one year after vesting), and contributing to an HSA if eligible. For RSAs specifically, a Section 83(b) election can shift the tax event to the grant date when the value may be lower.
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