Rsu Tax Calculator
Estimate taxes owed when restricted stock units vest based on share price and income bracket. Enter values for instant results with step-by-step formulas.
Formula
Vest Tax = Shares x Vest Price x (Federal Rate + State Rate + SS Rate + Medicare Rate)
At vesting, the full fair market value of RSU shares is taxed as ordinary income. Federal income tax, state income tax, Social Security (6.2%), and Medicare (1.45%) all apply. Capital gains tax applies separately on any appreciation after the vesting date.
Worked Examples
Example 1: Tech Employee RSU Vesting Event
Problem: 500 RSUs vest at $100/share. Employee is in the 24% federal bracket with 5% state tax. Sell-to-cover at 22% withholding. Shares later sold at $120.
Solution: Vest value: 500 x $100 = $50,000\nFederal tax (24%): $50,000 x 0.24 = $12,000\nSocial Security (6.2%): $50,000 x 0.062 = $3,100\nMedicare (1.45%): $50,000 x 0.0145 = $725\nState tax (5%): $50,000 x 0.05 = $2,500\nTotal vest tax: $18,325\nShares withheld (22%): ceil($11,000 / $100) = 110 shares\nShares received: 390\nCapital gain on sale: 390 x ($120 - $100) = $7,800\nLTCG tax (15%): $7,800 x 0.15 = $1,170
Result: Vest Tax: $18,325 | Shares Received: 390 | Capital Gain: $7,800 | Effective Rate: 36.7%
Example 2: Large RSU Vest in High-Tax State
Problem: 1,000 RSUs vest at $200/share. Employee is in the 35% federal bracket with 10% state tax. Sell-to-cover at 22%.
Solution: Vest value: 1,000 x $200 = $200,000\nFederal tax (35%): $200,000 x 0.35 = $70,000\nSocial Security (6.2%): $200,000 x 0.062 = $12,400\nMedicare (1.45%): $200,000 x 0.0145 = $2,900\nState tax (10%): $200,000 x 0.10 = $20,000\nTotal vest tax: $105,300 (52.65% effective)\nShares withheld at 22%: ceil($44,000 / $200) = 220\nShares received: 780\nAdditional tax owed: $105,300 - $44,000 = $61,300
Result: Vest Tax: $105,300 | Shares Received: 780 | Additional Tax Owed: $61,300 | Effective Rate: 52.7%
Frequently Asked Questions
Why is my RSU tax withholding often not enough?
The default federal withholding rate on RSU vesting is 22%, which applies to supplemental wages. However, many tech workers and professionals who receive significant RSU compensation are in the 32%, 35%, or even 37% federal tax bracket, meaning they are substantially underwithheld. When you add state taxes of 5% to 13%, Social Security at 6.2%, and Medicare at 1.45%, the actual total tax rate on RSU income can range from 35% to over 50%. For example, a California resident in the 35% federal bracket faces a combined rate of approximately 50% (35% federal + 13.3% state + 1.45% Medicare), but only 22% was withheld at vesting. This means they could owe an additional 28% when filing their tax return. Many financial advisors recommend either electing higher withholding or setting aside additional funds to cover the expected shortfall.
How do I calculate capital gains on RSU shares I sell?
When you sell RSU shares, your capital gain or loss is calculated as the difference between the sale price and your cost basis, which is the fair market value of the shares on the vesting date. For example, if your RSUs vested at $100 per share and you sell at $120 per share, your capital gain is $20 per share. The holding period for determining short-term versus long-term capital gains treatment begins on the vesting date, not the grant date. If you sell within one year of vesting, the gain is taxed as a short-term capital gain at your ordinary income tax rate. If you hold for more than one year after vesting, the gain qualifies for the preferential long-term capital gains rate of 0%, 15%, or 20% depending on your income level. If the stock price has declined since vesting, you may have a capital loss that can offset other gains.
Should I sell my RSU shares immediately or hold them?
This decision depends on your financial situation, tax bracket, risk tolerance, and views on the company's stock prospects. Selling immediately eliminates the risk of the stock price declining and converts your compensation into cash that can be diversified into other investments. From a tax perspective, selling immediately means any gain or loss is minimal since the sale price is close to the vesting price, simplifying your tax situation. Holding the shares means you are making an active investment decision to increase your concentration in your employer's stock, which carries both company-specific risk and market risk. Many financial advisors recommend selling RSUs promptly to maintain portfolio diversification, especially since your human capital (salary and future RSUs) is already tied to the company's success. If you hold and the stock appreciates, you benefit from long-term capital gains rates after one year.
How does the additional Medicare surtax affect RSU income?
The Additional Medicare Tax of 0.9% applies to combined wages, compensation, and self-employment income exceeding $200,000 for single filers or $250,000 for married filing jointly. Since RSU vesting income is treated as wages and added to your W-2, it contributes to your total compensation for purposes of this threshold. For example, if your base salary is $180,000 and $100,000 worth of RSUs vest in the same year, your total compensation is $280,000, putting $80,000 over the single filer threshold and triggering an additional $720 in Medicare surtax (0.9% of $80,000). Your employer is required to begin withholding the additional Medicare tax once your wages exceed $200,000 in a calendar year, regardless of your filing status. If your spouse also earns income, you may owe additional surtax at filing that was not withheld during the year.
Can I defer RSU income to reduce my current tax burden?
Standard RSUs cannot be deferred because the income is automatically recognized on the vesting date per IRS Section 409A regulations. However, some large companies offer deferred stock units (DSUs) or allow employees to make an irrevocable election to defer RSU delivery to a future date before the vesting period begins. This election must typically be made at least 12 months before the vesting date under Section 409A rules. Deferred RSUs delay the income recognition and tax liability until the shares are actually delivered, which could be at a specified future date, upon separation from service, or at retirement. Another indirect strategy is to maximize pre-tax retirement contributions in years when RSUs vest, using 401(k) contributions to offset some of the additional taxable income. However, 401(k) contributions reduce your salary withholding basis, not the RSU income directly.
How do RSU taxes work for employees in states with no income tax?
Employees in states with no income tax, such as Texas, Florida, Washington, Nevada, Wyoming, South Dakota, Alaska, Tennessee, and New Hampshire, enjoy a significant tax advantage on RSU income because they avoid the state tax component entirely. In a high-tax state like California with a top rate of 13.3%, an employee vesting $100,000 in RSUs would owe approximately $13,300 in state tax alone. In Texas, that same employee saves the entire $13,300. However, there are important nuances for employees who move between states or work in multiple states. If you earned RSUs while working in California but moved to Texas before vesting, California may still claim a portion of the RSU income based on the ratio of time the RSUs were earned in California. This allocation methodology varies by state, and some states are particularly aggressive about taxing deferred compensation earned within their borders.