RSU Tax Calculator
Work out the real tax on an RSU vest for 2026 — federal, state and FICA — and the shortfall left by your employer withholding at the flat 22% supplemental rate.
How to use this calculator
- 1Enter the number of shares vesting and the share price on the vest date — that price sets your income and your cost basis.
- 2Enter the W-2 wages you have already received this year, since those decide which bracket the vest falls into.
- 3Add your marginal state rate if your state taxes income.
- 4Read the shortfall figure: that is the amount you owe that nobody withheld, and the reason to set cash aside now rather than in April.
How the calculation works
Federal tax on vest = tax(other wages + vest value) − tax(other wages). Shortfall = total tax − (vest × withholding rate + FICA + state)- vest value
- Shares vesting × share price on the vest date — taxed as ordinary wages
- tax(...)
- The full 2026 federal bracket calculation, so the vest is taxed at the rates it actually lands in
- withholding rate
- The flat supplemental rate the employer applies — 22% up to $1m, 37% above
The federal figure is computed by running the real bracket schedule twice and taking the difference, rather than multiplying by a single rate. A large vest usually straddles two or three brackets, so any single-rate estimate is wrong in one direction or the other.
Social Security is charged only on the part of the vest that still fits under the annual wage base, which existing salary has usually already consumed for anyone receiving significant RSUs. Medicare has no cap.
RSU income is wages, not investment income, so the 3.8% Net Investment Income Tax does not apply at vest. It can apply to subsequent gains if the shares are held and later sold at a profit.
Worked example
500 shares at $120, on a $200,000 salary
- 1.The vest is 500 × $120 = $60,000 of ordinary wage income.
- 2.Stacked on $200,000 of salary, it falls mostly in the 32% and 35% federal brackets — far above the 22% withheld.
- 3.The employer withholds $60,000 × 22% = $13,200 for federal tax, plus FICA.
- 4.The actual federal tax on that $60,000 is substantially more, and the difference is owed with the return.
Result: A five-figure shortfall that withholding never covered
The same vest in California
- 1.The federal position is unchanged, but California adds roughly 10.3% at this income level.
- 2.That is another $6,180 of state tax on the $60,000 vest.
- 3.Combined federal, state and Medicare can take well over 45% of a vest at this income — which is why the net share count matters more than the headline grant value.
Result: Well under half the headline value kept
Why RSUs so often produce an April surprise
An RSU vest is not a stock transaction in the eyes of the tax code. On the day the shares vest, their full market value becomes ordinary wage income — identical in treatment to salary, reported on the same W-2, subject to the same brackets and the same payroll taxes. Nothing about receiving shares rather than cash changes that.
The problem is the withholding. Employers treat vests as supplemental wages and withhold federal tax at a flat statutory rate — 22% on the first $1,000,000 of supplemental wages in a year, and 37% above that. For an employee whose total income sits in the 22% bracket, that is roughly right. For someone earning $200,000 with a substantial grant, the vest is taxed at 32% or 35% at the margin while only 22% was withheld. The gap is real tax owed, it is invisible on every payslip, and it is discovered when the return is filed.
The trap is that the shares often fall in value between the vest and the filing deadline, while the tax bill is fixed at the vest-date price. Anyone who held the shares and watched them decline can find themselves owing tax on a value that no longer exists.
The sell-to-cover illusion
Most plans sell a portion of the vesting shares automatically to cover withholding. Because something was clearly sold and taxes clearly paid, it is natural to assume the liability is settled. It usually is not.
Sell-to-cover sells exactly enough to fund withholding at the flat rate, so it inherits the flat rate's shortfall precisely. A vest that should have been taxed at 35% has 22% sold to cover it, and the remaining 13 percentage points are simply unfunded. The employee holds more shares than they can actually afford to keep, without knowing it.
There are three practical responses, and they are worth deciding between deliberately rather than by default.
- Sell additional shares at vest — the simplest fix. Selling enough to cover the true rate rather than the withheld rate settles the liability immediately, and at a known price, since the vest-date price is also the cost basis and an immediate sale produces essentially no further gain or loss.
- Make a quarterly estimated payment — if you want to keep the shares, sending the shortfall to the IRS in the quarter the vest occurred both funds the bill and avoids the underpayment penalty.
- Increase W-4 withholding — raising withholding on regular salary for the rest of the year covers the gap through payroll. Withholding is treated as paid evenly across the year regardless of when it happened, which makes this the most forgiving option for penalty purposes.
Cost basis, and the double-taxation mistake
The single most common filing error with RSUs is paying tax twice on the same money. Because the full vest value was already taxed as wages, the cost basis of those shares is the vest-date price — the amount already taxed.
Brokers have historically reported a cost basis of zero, or omitted it, on shares acquired through equity plans. If that figure is entered as filed, the entire proceeds of a sale are reported as capital gain, and tax is paid a second time on income already taxed as wages. The correction is to use the vest-date fair market value as basis, which is exactly the price entered in this calculator. Any gain or loss after that date is a separate capital transaction: short-term if sold within a year of vesting, long-term after.
What this assumes, and where it stops
Assumptions
- The vest is taxed under the 2026 federal schedule, and the figure entered as other wages is your full W-2 income for the year before the vest.
- State tax is applied as a flat marginal rate to the vest value, which is a simplification of every state's own bracket system.
- FICA is charged at employee rates, with existing wages consuming the Social Security wage base first.
- The employer withholds at the flat supplemental rate entered, and withholds FICA and state tax at their true rates.
Limitations
- This models the marginal tax on one vest, not your complete return. Credits, itemised deductions, other income and multiple vests across a year will all move the real figure.
- State tax is a single flat rate here. Real state systems have brackets, and several tax equity compensation on a workday-allocation basis if you moved states between grant and vest.
- Underpayment penalties and safe-harbour rules are not calculated, only flagged.
- This is an estimate for planning, not tax advice. A vest of any size is worth reviewing with a qualified tax professional.
Common questions
Why do I owe more tax on my RSUs when my company already withheld some?
Because the withholding rate and your actual tax rate are different numbers. Employers withhold a flat 22% on supplemental wages up to $1,000,000, regardless of your total income. If your salary plus the vest puts you in the 32% or 35% bracket, then roughly 10 to 13 percentage points of the tax on that vest was never withheld. It is real tax owed, and it comes due with your return.
My company sold shares to cover taxes — am I covered?
Usually only partly. Sell-to-cover sells just enough to fund withholding at the flat 22% rate, so it carries exactly the same shortfall as the flat rate does. If your true marginal rate is higher, the difference remains unfunded and you still owe it. Selling a few additional shares at vest, or making an estimated payment for that quarter, is what actually closes the gap.
What cost basis should I use when I sell RSU shares?
The share price on the vest date — the same figure your income was calculated from. That amount has already been taxed as wages, so only movement after the vest date is a capital gain or loss. Brokers frequently report a basis of zero on equity-plan shares, and accepting that figure means paying tax twice on the same money. It is one of the most common and most expensive filing errors with RSUs.
Do RSUs get hit by the 3.8% Net Investment Income Tax?
Not at vest. RSU income is wages, and the Net Investment Income Tax applies to investment income, not earned income. It can apply later: if you hold the shares after vesting and sell at a profit, that capital gain is investment income and may be subject to the 3.8% surtax if your modified adjusted gross income is above the threshold. High wage income can also trigger the separate 0.9% Additional Medicare Tax, which is included here.
Sources
- Publication 525: Taxable and Nontaxable Income — Restricted Property — US Internal Revenue Service
- Publication 15: (Circular E) Employer's Tax Guide — Supplemental Wages — US Internal Revenue Service
- Topic no. 751, Social Security and Medicare withholding rates — US Internal Revenue Service
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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