How are RSUs taxed when they vest?

At vest, the fair market value of the shares becomes ordinary wage income under IRC §83(a) because the substantial risk of forfeiture lapses at that point. The employer reports the vest income in W-2 Box 1, applies Social Security tax (Box 3, up to the 2026 wage base of $184,500), Medicare tax (Box 5), and federal income tax withholding (Box 2). Federal withholding on the vest income normally uses the supplemental wage rate of 22 percent (37 percent above $1 million from that employer in a calendar year). See IRS Publication 525 and Publication 15 section 7.

Why is my withholding only 22 percent when I am in a higher bracket?

The 22 percent figure is the IRS supplemental wage withholding rate set by Publication 15 section 7. It is a withholding rate, not your marginal income tax rate. If your marginal federal bracket is 24 percent, 32 percent, 35 percent, or 37 percent, the 22 percent supplemental withholding will not cover the actual federal tax on the vest. The shortfall surfaces at filing as a balance due, and it is the most common surprise for tech and finance employees with concentrated equity compensation.

What is sell-to-cover?

Sell-to-cover is the most common employer mechanic for paying tax on an RSU vest. The employer instructs the equity broker to sell a portion of the vested shares immediately at vest and remit the proceeds to cover federal supplemental withholding (22 percent), Social Security, Medicare, and (for high earners) Additional Medicare Tax. The employee receives the remaining shares net of the share count sold for taxes. If the supplemental rate under-withholds relative to the employee's marginal bracket, the difference becomes a balance due at filing.

Can I make an 83(b) election on my RSUs?

No. An 83(b) election is available only for restricted stock awards (RSAs) and certain founder share grants where actual property is transferred to the employee at grant. RSUs are an unfunded contractual promise to deliver shares in the future, not a transfer of property at grant, so they do not satisfy the IRC §83(b) requirements. The IRS Equity-Based Compensation Audit Technique Guide (Publication 5992) confirms that no 83(b) election is permitted on RSUs. The first taxable event for a normal RSU is the vest date under IRC §83(a).

Do I owe Social Security and Medicare on RSU vest income?

Yes. RSU vest income is W-2 wages and is subject to FICA. Social Security tax (6.2 percent) applies up to the 2026 wage base of $184,500, combined with regular wages. Medicare (1.45 percent) applies to the entire vest income with no cap. The Additional Medicare Tax of 0.9 percent applies once combined calendar-year wages exceed $200,000 single/HOH, $250,000 MFJ, or $125,000 MFS. Employers must begin withholding the 0.9 percent once any one employee crosses $200,000 with that employer in the calendar year, regardless of filing status.

How are RSU shares taxed when I sell them after vest?

After vest, the shares are treated like any other stock you own. Your cost basis equals the FMV at vest (the same amount included in your W-2 Box 1 ordinary income). When you sell, the difference between sale proceeds and cost basis is a capital gain or loss. Long-term capital gains rates (0 percent, 15 percent, or 20 percent depending on income) apply if you hold the shares more than one year after the vest date. Short-term gains (held one year or less) are taxed at ordinary income rates. Avoid double-counting the vest income as part of cost basis only if your broker's 1099-B reports the wrong basis (a common error).

What are double-trigger RSUs?

Double-trigger RSUs require two events for the substantial risk of forfeiture to lapse: (1) the time-based vesting condition (typically a service period such as 4 years quarterly), and (2) a liquidity event (commonly an IPO, acquisition, or change of control). Until both triggers occur, the RSU has no realizable value to the employee and no tax is due. Once both triggers occur, all previously time-vested shares become taxable in the same year, often producing a large lump-sum income inclusion in the IPO year. Double-trigger RSUs are standard at private companies; single-trigger RSUs are standard at public companies.

What if my company is private and my RSUs have not had a liquidity event?

For double-trigger RSUs at a private company, the FMV at the time-based vest date is not yet income because the second trigger (liquidity) has not occurred. There is no W-2 income, no withholding, and no tax due in the year the time-based vest happens. When the liquidity event occurs (typically the IPO date or change of control), all time-vested but unliquidated shares become taxable that year at the IPO-day FMV. Plan for the lump-sum tax impact in the IPO year, including potential underpayment penalties if estimated payments are not made.

How do RSUs affect state tax?

RSU vest income is subject to state withholding in the state where the work was performed during the vesting period. For employees who relocated during the vest period, multi-state allocation rules apply. California taxes RSU vest income for any portion of the vest period spent working in California, even if the employee no longer lives in California at the vest date. New York, Massachusetts, and other high-tax states have similar source-state allocation rules. State supplemental withholding rates vary widely; California uses 10.23 percent on bonuses and 6.6 percent on stock options. Check your state Department of Revenue.

Does this calculator include state tax?

No. This calculator returns federal income tax withholding, Social Security, Medicare, and Additional Medicare Tax only. State withholding on RSU vest income varies by state and by allocation method for multi-state employees. To estimate state tax, multiply the vest income by your state supplemental rate (if your state uses a flat method) or use your state Department of Revenue's percentage method tables. States with no individual income tax (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming) apply no state tax to the vest.

RSU Tax Calculator 2026 - Vest Withholding, Sell-to-Cover, and Shortfall

Estimate the tax on a restricted stock unit vesting event under IRC §83(a). Computes ordinary-income inclusion at vest FMV, federal supplemental withholding, FICA, the sell-to-cover share count, and the under-withholding gap when your marginal bracket exceeds the 22 percent flat supplemental rate.

Your Vest Details

Filing Status

Sets the Additional Medicare threshold and the marginal-rate gap calculation. $200K single/HOH, $250K MFJ, $125K MFS.

Shares Vesting

FMV Per Share ($)

Number of shares vesting on this event × the closing FMV on the vest date. The product is your ordinary income inclusion under IRC §83(a).

YTD Wages So Far This Year ($)

All wages received this calendar year before this vest (regular pay, prior bonuses, prior vests). Drives the Social Security cap and Additional Medicare threshold.

Your Marginal Federal Rate (%)

Used to estimate the under-withholding gap. If your marginal rate exceeds 22 percent, the supplemental withholding under-collects and you owe the difference at filing. Pick the bracket your last $1 of taxable income falls into.

Sale Method at Vest

Sell-to-cover sells just enough shares to cover withholding; you keep the rest. Sell all liquidates the entire vest at the vest-day price. Hold all assumes you fund withholding from cash and keep every share.

📊

Enter your vest details
to estimate withholding, sell-to-cover shares, and shortfall

Item	Value	Status
Federal supplemental withholding rate (vest income ≤ $1M from one employer)	22%	Confirmed
Federal supplemental rate above $1M (per employer, calendar year)	37%	Confirmed
Social Security rate (employee share)	6.2%	Confirmed
2026 Social Security wage base	$184,500	Confirmed
Medicare rate (employee share)	1.45%	Confirmed
Additional Medicare Tax rate	0.9%	Confirmed
Additional Medicare threshold: Single / HOH	$200,000	Confirmed
Additional Medicare threshold: MFJ	$250,000	Confirmed
Additional Medicare threshold: MFS	$125,000	Confirmed
Employer mandatory Additional Medicare withholding threshold	$200,000 (per employee, regardless of filing status)	Confirmed
Governing statute (vest as ordinary income)	IRC §83(a)	Confirmed
83(b) election availability for normal RSUs	Not available (RSUs are an unfunded promise, not transferred property)	Confirmed
Vest cost basis for capital gains on later sale	FMV at vest (already in W-2 Box 1)	Confirmed
Long-term capital gains holding period	More than 1 year after vest date	Confirmed
State withholding (varies by state)	See your state DOR	Provisional

RSU Tax Calculator 2026

Quick Facts: RSU Vest Withholding (Tax Year 2026)

How This Is Calculated

Step 1: Vest Income (Ordinary Wages) Confirmed

Step 2: Federal Supplemental Withholding Confirmed

Step 3: FICA - Social Security + Medicare Confirmed

Step 4: Additional Medicare Tax Confirmed

Step 5: Sell-to-Cover Share Count Confirmed

Assumptions

Sell-to-Cover vs Sell-All vs Hold-All - Which Most Employers Use

When 22 Percent Supplemental Withholding Under-Collects

Real-World Examples

Practitioner Insight (LMN Tax Inc.)

When This Estimate May Not Apply

Frequently Asked Questions

What To Do Next

Related Tools and Guides