📊 RSU Tax Calculator
RSUs are taxed as ordinary income the moment they vest. Enter your vest details to see the tax hit and your after-tax value.
How RSUs Are Taxed
Restricted Stock Units are a promise of future shares. Nothing is taxed at grant — the taxable event is vesting, when shares land in your account. The full market value at vest is ordinary (W-2) income, exactly like a cash bonus.
The Vest Formula
Net = Value − Federal − SS − Medicare − State
Most employers sell to cover: they liquidate enough shares to cover withholding (often at the 22% supplemental rate) and deposit the rest. Crucially, your cost basis becomes the vest price — if you later sell higher, only the gain above vest price faces capital gains tax.
Worked Example
200 shares vest at $150 = $30,000 of ordinary income. Withholding: federal 22% = $6,600, Social Security = $1,860, Medicare = $435, state 5% = $1,500. After-tax value ≈ $19,605, and each retained share carries a $150 cost basis going forward.
Official reference: IRS.gov. This is an estimate for planning only — not tax advice. Verify with a CPA or tax professional before filing.
The Concentration Trap
RSUs align you with your employer — until your job, salary, and portfolio all depend on one stock. Financial planners typically advise selling vested shares on a schedule and diversifying; holding is an active bet, not a default. Note the tax mechanics: vesting creates ordinary income (no 83(b) election available for RSUs, unlike restricted stock), and any later gain is capital — short-term unless you hold a year post-vest. Withholding at vest is usually 22% federal, so high earners owe more at filing. Double-trigger RSUs (common pre-IPO) vest only after both time service and a liquidity event, creating a big tax bill in the IPO year with no cash until you can sell — plan liquidity for that April. Moving states between grant and vest can split taxation across states.
Frequently Asked Questions (FAQs)
Are RSUs taxed at vest or at grant?
At vest. Grants are not taxable. When shares vest, the fair market value is taxed as ordinary income even if you do not sell a single share.
What does "sell to cover" mean?
Your employer automatically sells enough vested shares to cover tax withholding and delivers the remaining shares to you. It is the most common RSU tax method.
Do I owe more tax if I sell RSUs later?
Only on gains above your vest-price cost basis. Sell within a year: short-term capital gains (ordinary rates). Hold over a year: long-term rates (0/15/20%).
What happens to RSUs if I leave the company?
Unvested RSUs are typically forfeited when you leave (some plans accelerate on acquisition or retirement). Vested shares are yours to keep.
Are RSUs subject to Social Security tax?
Yes — RSU income counts as wages for Social Security (up to the wage base) and Medicare in the year of vesting.
Last updated: September 2026