RSU Tax Calculator
Estimate federal income tax, FICA & California state tax on your restricted stock unit vest — with BigTech presets, bracket visualizer & 4-year vest schedule
Enter your RSU vest details
Fill in your vest details and click Calculate RSU Tax to see your full tax breakdown — including bracket analysis and California source rule impact.
- ✓ Federal income tax by bracket (2024, 2025 & 2026)
- ✓ Social Security & Medicare (FICA)
- ✓ Additional Medicare Tax (0.9% above $200K)
- ✓ California state income tax (up to 13.3%)
- ✓ Withholding gap vs. supplemental rate (22% flat)
- ✓ 4-year vest schedule visualizer
How RSU Tax Actually Works — A Practical Guide for US Tech Employees
When your Restricted Stock Units (RSUs) vest, the IRS treats the full fair market value as ordinary income — the same as your salary. This is the fundamental rule, and it does not change regardless of whether you are at Google, Apple, Amazon, Meta, Microsoft, or any other public company. There is no tax at grant, no choice about when to recognize income, and no way to defer the tax event. The moment shares vest, you owe federal income tax, Social Security tax, Medicare tax, and California state income tax (if applicable). What catches most tech employees off guard is not the tax itself — it is the gap between what was withheld and what is actually owed.
Your employer withholds federal income tax on RSU vests at a flat 22% mandatory supplemental rate for the first $1 million of supplemental wages in a calendar year. For employees in the 32%, 35%, or 37% federal bracket — which includes many senior engineers and managers at large tech companies — this creates a 10%–15% gap between what was withheld and the actual liability. On a $50,000 vest for someone in the 35% bracket, that's a $6,500 underpayment that accumulates silently until April. This calculator shows you the gap so you can make estimated payments before the IRS charges underpayment penalties (currently set at the federal short-term rate plus 3 percentage points, charged quarterly).
The Three RSU Tax Events — What Matters and What Doesn't
Grant date — no tax, no action required. When your employer grants you RSUs, you receive a promise of future shares contingent on continued employment and, in some cases, performance milestones. The grant date FMV is irrelevant for tax purposes. It does not create income, it does not start any holding period that matters, and it does not appear on your W-2. Many employees incorrectly assume the grant price is their cost basis — it is not. The grant price is irrelevant to your taxes entirely.
Vest date — this is your taxable event. On the vest date, shares transfer to your brokerage account. The IRS deems the FMV × number of shares as ordinary income, fully recognized in the tax year of vesting. Your employer adds this amount to W-2 Box 1 (Wages), Box 3 (Social Security wages, up to the annual cap), and Box 5 (Medicare wages). The sell-to-cover amount — where the employer automatically sells enough shares to cover the withholding taxes — does not change the income recognition. Whether you receive 75 net shares (after selling 25 for taxes on a 100-share vest) or elect a same-day sale of all 100 shares, the full FMV of 100 shares at vest is income.
Sale date — capital gains (or loss) on any price change since vest. Once you own the vested shares, any subsequent sale creates a separate and distinct tax event. Your cost basis is the FMV on the vest date — already reported as ordinary income. If you sell immediately at vest, the capital gain is approximately zero (the stock price may move slightly between vest and execution). If you hold the shares and sell later, you owe capital gains tax on any price appreciation above the vest date FMV. Hold for more than 12 months from the vest date and that gain is taxed at the long-term capital gains rate (0%, 15%, or 20% depending on your income). Sell within 12 months and it is short-term, taxed as ordinary income.
The Withholding Gap: Why You Almost Certainly Owe More Than Was Withheld
The 22% flat federal supplemental withholding rate is a statutory requirement — your employer cannot legally withhold at your actual marginal rate unless you request additional withholding through a W-4 adjustment. For employees in the 22% bracket, this is fine: the withholding roughly matches the liability. For the 24%, 32%, 35%, and 37% brackets, the underpayment compounds quickly across multiple vest dates throughout the year.
To illustrate: an engineer earning $180,000 in base salary (24% bracket for single filers in 2025) with quarterly RSU vests of $20,000 each faces a $160,000 annual income before vests. Each $20,000 vest is withheld at 22% ($4,400). But that vest income, stacked on top of the $160,000 salary, is actually in the 24% bracket ($4,800 owed). That's a $400 gap per vest. Four vests per year = $1,600 underpayment. Now scale to a senior engineer at $300,000 salary with $100,000 in annual RSU vests: the vests land in the 35% bracket, but only 22% is withheld. The annual underpayment is $13,000. Without quarterly estimated payments, this triggers underpayment penalties on top of the tax due.
The safe-harbor rule prevents penalties: pay at least 100% of last year's total tax liability through withholding or estimated payments (110% if your prior-year AGI exceeded $150,000). This means if you paid $60,000 in total taxes last year, ensuring at least $60,000 is paid this year — regardless of whether this year's income is higher — protects you from the underpayment penalty. Many high-income tech employees use this as a planning anchor: after a large vest year, set your prior-year total tax as the estimated payment target for the following year, then settle the remainder when filing.
FICA on RSU Vests: Social Security and Medicare at Vest
Social Security tax (6.2%) applies to RSU vest income up to the annual wage base: $168,600 in 2024, $176,100 in 2025, and $184,500 in 2026. The wage base is indexed by the SSA each year based on national average wage growth. If your base salary already exceeds the wage base before your RSUs vest — a common situation for senior tech employees — no additional Social Security tax applies to the vest income. The YTD wages field in this calculator lets you model this: enter your salary paid to date in the year, and the calculator reduces the Social Security tax on the vest accordingly.
Medicare tax (1.45%) has no cap and applies to all RSU vest income. For individuals with total income above $200,000 (single filers) or $250,000 (married filing jointly), an additional 0.9% Additional Medicare Tax applies to earned income above those thresholds. This is the Medicare surtax introduced by the Affordable Care Act. It is calculated as part of your regular federal income tax return — your employer is not required to withhold it, though they may do so for wages over $200,000. The calculator shows it as a separate line item so you can factor it into your estimated payments.
California State Tax and the Source Rule — What Happens When You Move
California taxes RSU vest income at the same progressive rates as ordinary income — up to 12.3% on income over $625,370 (single, 2025), plus a 1% Mental Health Services surcharge above $1 million. California has no long-term capital gains preference: capital gains are taxed as ordinary income. This makes California's effective marginal rate on RSU vest income the highest of any US state, reaching 13.3% for top earners.
The California source rule is the aspect that surprises most employees who relocate. Under California's Franchise Tax Board regulations, RSU income is considered sourced to the state where the services were performed that caused the RSU to vest. Specifically, the FTB apportions RSU income based on the ratio of California workdays during the vesting period to total workdays during the vesting period. If you worked in California for all four years of a four-year vest schedule and then moved to Texas the day before the final shares vested, California can still claim tax on roughly 99.9% of that vest — because the services that earned those shares were performed in California.
This is not theoretical. California has actively pursued former residents for RSU income after moves to Nevada, Washington, Texas, and Florida. The FTB issues questionnaires and audits specifically for high-income individuals who recently changed state of domicile. If you are planning a move from California and have unvested RSUs, consult a CPA or tax attorney before the move — the California workday ratio calculation and the strength of your domicile change will determine your actual California exposure. This calculator flags the source rule when you toggle California on, but the workday ratio calculation itself requires your specific vesting schedule and move date, which are beyond the scope of this tool.
RSU vs. ISO vs. ESPP: The Key Tax Differences
If you receive multiple forms of equity compensation — which is common at large tech companies, startups transitioning to RSUs, and companies that offer ESPPs alongside equity — understanding the tax treatment of each type helps you prioritize when to sell and how to manage your overall equity tax exposure.
| Feature | RSU (Restricted Stock Unit) | ISO (Incentive Stock Option) | ESPP (Section 423 Plan) |
|---|---|---|---|
| Tax at grant | None | None | None |
| Tax at exercise/vest/purchase | Ordinary income on full FMV at vest | AMT preference item only (no regular income tax) | No tax at purchase (deferred to sale) |
| Tax at sale | Capital gains on appreciation above vest FMV | LTCG if holding period met; else ordinary income | Ordinary income on discount + capital gain on remainder |
| AMT risk | None — RSUs generate no AMT preference items | Yes — spread at exercise is AMT preference; can create large AMT bills in high-price years | Generally none for qualifying plans |
| FICA applies at vest/purchase? | Yes — full FICA at vest (SS + Medicare) | No FICA at exercise | No FICA on ESPP discount at sale (excluded under IRC §3121) |
| Holding period for LTCG | 12 months from vest date | 2 years from grant AND 1 year from exercise | Qualifying: 2 years from offering start AND 1 year from purchase date |
| Employer withholding | 22% flat federal supplemental rate at vest | None at exercise | None at purchase; employer reports via W-2 at sale |
| Who offers this type | Standard at BigTech (Google, Meta, Amazon, Apple, Microsoft) and most public companies | Primarily pre-IPO and early-stage companies; increasingly rare at large public companies | Offered by many public companies alongside RSU grants |
The key planning point: ISOs are the only equity type that creates an AMT risk. RSUs and ESPPs do not generate ISO-related AMT preference items. If you see references to AMT in the context of tech equity, they relate specifically to ISO exercises — not RSU vests. Many engineers who hold ISOs from pre-IPO employment and also receive RSUs at their current public company employer confuse the two. This calculator explicitly confirms: RSU vests are not subject to AMT.
People Also Ask
- How much tax do I pay on RSU vesting?
- RSU vest income is taxed as ordinary income at your marginal federal rate (10%–37%), plus FICA (Social Security 6.2% up to the annual wage base, Medicare 1.45%), plus 0.9% Additional Medicare Tax if your total income exceeds $200,000 single/$250,000 joint, plus state income tax if applicable. For a California resident earning $250,000 salary with a $50,000 RSU vest, the combined marginal rate can exceed 52% — federal 35% + Medicare 2.35% (including NIIT) + California 12.3% + California SDI 1.1%.
- Do I owe taxes when RSUs vest if I don't sell the shares?
- Yes. RSU vest income is recognized at vest regardless of whether you sell. The IRS taxes you on the FMV of the shares on the vest date, not on sale proceeds. Your employer sells shares (sell-to-cover) to pay the withholding — but even if you elect not to sell any shares, the income is still reportable in the vest year and taxes are still owed.
- What is the RSU Social Security wage base for 2026?
- For 2026, the Social Security wage base is $184,500 (up from $176,100 in 2025 and $168,600 in 2024). Social Security tax (6.2%) only applies to the first $184,500 of combined wages and RSU vest income. Employees whose base salary already exceeds $184,500 in the year of a vest owe no additional Social Security on the vest income. Enter your YTD wages in this calculator to model this accurately.
- How do I avoid double taxation on RSUs?
- RSUs are not inherently double-taxed if you track cost basis correctly. Your cost basis in vested shares equals the FMV at vest — the amount already taxed as ordinary income on your W-2. When you later sell, capital gains are calculated only on appreciation above that basis. The risk of double taxation arises if you report a capital gain using the grant price (zero basis) instead of the vest FMV basis. Always verify your broker's 1099-B cost basis against your W-2 vest income. Most brokers update cost basis automatically for employer-reported RSU income, but verify this before filing.
- What is the Net Investment Income Tax (NIIT) on RSUs?
- RSU vest income itself is NOT subject to the 3.8% Net Investment Income Tax (NIIT) because it is earned income, not investment income. However, capital gains from selling RSU shares after vest may be subject to NIIT if your Modified Adjusted Gross Income exceeds $200,000 (single) or $250,000 (married filing jointly). A large vest year can push your MAGI over the NIIT threshold, making subsequent capital gains on those shares subject to the additional 3.8%.
RSU Tax Calculator — Frequently Asked Questions
RSUs are taxed as ordinary income at vest — not when granted, not when sold, specifically at the moment shares transfer to your account on the vest date. The IRS treats FMV × vested shares as wages, fully taxable at your marginal rate. Federal income tax is withheld at the 22% supplemental rate (37% above $1 million in supplemental wages in a calendar year). FICA is withheld at the normal rates. The income shows up in W-2 Box 1, Box 3 (up to the Social Security wage base), and Box 5. If your marginal federal rate is above 22%, the supplemental withholding undershoots your actual liability — the difference is owed at filing.
The 22% supplemental withholding rate is a legal requirement for RSU income up to $1 million per year, regardless of your actual income tax bracket. If you are in the 32%, 35%, or 37% bracket, your employer withholds too little. The gap — 10%, 13%, or 15% respectively — is your responsibility to cover. For a $60,000 RSU vest in the 35% bracket: $13,200 withheld at 22%, but $21,000 actually owed at 35% — a $7,800 gap for that single vest event. Multiply across four quarterly vests and you have a $31,200 shortfall that becomes due April 15. Make quarterly estimated payments using Form 1040-ES to avoid underpayment penalties, which accrue at the IRS underpayment rate (currently federal short-term rate + 3%) from when the payment was due, not from April 15.
No — RSUs do not generate AMT preference items. This is a factual distinction that matters: AMT liability arises from Incentive Stock Options (ISOs), where the spread between exercise price and FMV at exercise is an AMT preference item under IRC §56. RSUs have no exercise step. They vest as ordinary income, period. There is no ISO-style spread, no AMT preference, and no need to run AMT calculations specifically because of RSU vests. If you hear colleagues talking about AMT and equity compensation, they are referring to ISO exercises — a completely different instrument. If you have ISOs in addition to RSUs, consult a CPA before exercising ISOs, particularly in years with large RSU vests that raise your ordinary income significantly.
California uses a workday-based source rule for RSU income: RSU vest income is apportioned to California based on the fraction of workdays during the full vesting period that occurred in California. If you worked in California for 3 of 4 years in a standard cliff/graded vest schedule and moved to Texas before the final vest, California asserts taxing rights on 75% of that vest's income at CA rates (up to 13.3%). The FTB actively enforces this rule and issues questionnaires to high-income taxpayers who leave California within 12 months of a large equity vest. The safe harbor for avoiding CA residency claims requires filing a part-year return, changing your domicile — drivers license, voter registration, bank accounts — before the vest date, and spending less than 546 days in California over any 24-month period after the move. This is a complex area; the specific workday ratio, your grant date, and your employment history in California all affect the outcome. Use a CPA who specializes in California equity taxation before executing a move strategy.
These are two entirely separate tax events with different tax characters. At vest: FMV × shares = ordinary income, taxed at marginal rates (up to 37% federal), reported on W-2, subject to FICA withholding. Your cost basis in the shares is set to FMV on the vest date. At sale: the capital gain (or loss) equals sale price minus FMV at vest. If you sell on the same day as vest, the gain is approximately zero (any movement between vest time and execution). If you hold for more than 12 months from the vest date and then sell, any appreciation above the vest FMV is long-term capital gains taxed at 0%, 15%, or 20% — significantly lower than ordinary income rates for most tech employees. The hold-for-LTCG strategy only makes sense if you believe the stock will appreciate meaningfully — otherwise the tax savings from long-term rates on a $0 or negative gain produce no benefit.
Sell-to-cover is the default at most companies: your employer automatically sells the minimum number of shares required to cover withholding taxes at vest. You receive the remaining net shares in your brokerage account. The shares sold generate a near-zero capital gain (sale price = vest FMV, approximately). You own a meaningful number of shares after the event. Same-day sale means you instruct your broker to sell all vested shares immediately upon vesting. You receive cash equal to FMV × all shares minus total taxes withheld. Your capital gain is approximately zero. This eliminates all post-vest equity concentration in your employer's stock from that grant. Many financial planners recommend same-day sale as the default strategy for employees who already have significant retirement account exposure to their employer via stock options, 401(k) matching, or other equity — because concentration in a single company is the primary risk factor in most tech employees' net worth.
Three reasons. First: the 22% flat supplemental rate. If your marginal rate is 32%–37%, the withholding gap is 10%–15% of every vest. Second: California state income tax. CA withholding on RSUs is often set at the employer's payroll rate for your salary rather than accounting for the full progressive impact of a large vest. Third: FICA — specifically the 0.9% Additional Medicare Tax, which employers are only required to withhold once wages exceed $200,000, but the full obligation may apply from a lower combined income base. To fix the underpayment prospectively: increase W-4 withholding by specifying an additional dollar amount to withhold per paycheck, or make quarterly Form 1040-ES estimated payments. Both approaches work; the estimated payment approach gives you better control if your vest schedule is irregular or unpredictable.
Generally, no — standard RSUs cannot be the subject of an 83(b) election under current IRS rules. The 83(b) election accelerates income recognition to the date of property transfer, but standard RSUs typically involve no transfer of property at grant — you receive a contractual promise, not shares. Since there is nothing to transfer, there is nothing to elect. The 83(b) election is designed for restricted stock (where you receive actual shares at grant, subject to a vesting restriction) and for early-exercise options where you exercise before vesting. For double-trigger RSUs at pre-IPO companies, certain structures may allow an 83(b)-adjacent election, but these are highly fact-specific. If you are at a private company with an equity grant that includes a liquidity trigger, consult a CPA before the filing deadline — a late 83(b) cannot be filed and cannot be corrected after 30 days from the grant date.
RSU vest income is included in W-2 Box 1 (Wages, tips, other compensation) along with your regular salary and bonus — there is no separate RSU-specific box. It is also included in Box 3 (Social Security wages, up to the wage base) and Box 5 (Medicare wages, unlimited). Many employers include an informational line in Box 14 showing the RSU amount separately for your reference, but this is not required. Some employers note it as "RSU" or "ESOP" in Box 14; others do not. The most reliable way to identify your RSU income on your W-2: compare Box 1 to your year-end pay stub's cumulative gross wages. The difference, net of any other supplemental income (bonus, commissions), is your RSU vest income. Your broker's cost basis on the 1099-B for any same-day or near-term sales should match this amount — if it doesn't, use the W-2 figure as your cost basis on Form 8949.
IRS underpayment penalties accrue from the due date of each quarterly estimated payment — not from April 15. For 2026, the four quarterly due dates are April 15, June 16, September 15, and January 15, 2027. The penalty rate is the federal short-term rate plus 3 percentage points, compounded daily, applied to the underpayment amount from the quarterly due date to the payment date. To avoid penalties: satisfy the safe-harbor rule (pay at least 100% of last year's total tax liability, or 110% if prior-year AGI exceeded $150,000), or pay 90% of the current year's actual tax liability through withholding or quarterly payments. For a tech employee with variable RSU income, the 100%/110% prior-year liability safe harbor is usually the most practical — it requires no current-year forecasting and eliminates penalty risk entirely, even if this year's income is substantially higher than last year's.