RSU Tax Calculator

When your RSUs vest, the full fair market value on the vesting date is ordinary income — taxed at your marginal federal rate, subject to FICA, and taxed by your state. Employers typically withhold only 22% for federal income tax (the supplemental withholding rate), but senior tech employees are often in the 32–37% bracket. The gap becomes a surprise bill in April. This calculator shows your real tax before it surprises you.

How RSU taxation works

Under IRC § 83(a), restricted stock vests when it is no longer subject to a substantial risk of forfeiture. At that point, the full fair market value of the vested shares is includible in gross income as compensation — reported on your W-2 in the year of vesting, just like salary. There is no "exercise" for RSUs; the tax event is vesting, period.

Your cost basis in the shares after vesting equals the FMV at vest (the same amount you reported as income). If you sell immediately, there is no capital gain or loss — you've recovered your basis. If you hold and later sell at a higher price, the appreciation is capital gain — long-term if you held 12+ months from the vesting date.

The 22% withholding trap

Federal law requires employers to withhold on supplemental wages (including RSU income) at the flat supplemental rate of 22% — or 37% if supplemental wages in the calendar year exceed $1 million.³ For a tech employee with a $180,000 base salary in the 32–35% marginal bracket, 22% withholding dramatically underpays the federal tax on a large vesting event. A $170,000 RSU vest at a 35% marginal rate generates $59,500 of federal tax — but the employer only withholds $37,400. The $22,100 gap is due at filing.

Most employees don't realize this is happening. The solution is to track your cumulative RSU income each calendar year and make estimated tax payments (IRS Form 1040-ES) to cover the gap — or adjust W-4 withholding on your salary to over-withhold and offset.

FICA on RSU income

RSU vesting is subject to FICA in the year of vesting. Social Security tax (6.2%) applies to income up to the 2026 wage base of $184,500.² If your base salary already exceeds $184,500 before any RSU vesting, no additional Social Security applies to RSU income. Medicare (1.45%) applies without limit. Additional Medicare Tax (0.9%) applies to compensation above $200,000 (single) or $250,000 (MFJ) under IRC § 3103.

Sell-to-cover and net settlement: the cost basis trap

When RSUs vest, employers typically use one of two withholding methods: sell-to-cover (broker sells enough shares to cover withholding taxes and delivers the rest to you) or net settlement (company retains shares equivalent to the tax withholding and delivers the remaining shares). Either method satisfies the withholding requirement — but creates a cost basis record for the sold/withheld shares equal to the FMV on the vesting date.

This generates a 1099-B at year-end showing a sale. If your brokerage reports the correct basis (FMV at vest), there will be no gain or loss — it was just a tax payment. But if the 1099-B uses your original cost basis of $0 (for employer-granted RSUs) or an adjusted cost that doesn't match, you'll appear to have a taxable gain or loss on shares you received for tax withholding purposes only. Always reconcile your 1099-B against your W-2 to catch this.

NIIT: the hidden 3.8% on post-vest appreciation

RSU income at vesting is wages — not investment income — so the 3.8% Net Investment Income Tax (NIIT, IRC § 1411) does not apply at vesting. However, if you hold shares and later sell them, any capital gain is investment income and subject to NIIT if your modified AGI exceeds the threshold ($200,000 single / $250,000 MFJ). At the federal level, this makes the long-term capital gains rate effectively 18.8% (15% + 3.8% NIIT) or 23.8% (20% + 3.8%) for high earners.