RSU Vesting Tax Calculator (US)

RSU Tax Guide for US Employees

How RSUs Are Taxed?

When RSUs vest, the FULL VALUE is taxed as ordinary income — exactly like a cash bonus. You don't have to sell to owe tax. Example: 200 shares vest at $150/share = $30,000 added to your W-2 income. This income is subject to: federal income tax (at YOUR marginal rate, not the 22% withheld rate), state income tax, Social Security (up to wage base), Medicare (with additional 0.9% over $200k single/$250k MFJ), and 3.8% NIIT if you sell at a gain in same year. After vesting, your cost basis equals the share price at vesting, which is what determines any further capital gain or loss when you eventually sell.

What do I need to know about The Withholding Trap?

Employers withhold federal tax on RSUs at the 22% supplemental wage rate (or 37% if you've already received $1M+ in supplemental wages this year). PROBLEM: most RSU recipients are in higher tax brackets. A high earner whose marginal rate is 35% only has 22% withheld — you OWE an extra 13% at tax time. On $100,000 of RSU vesting, that's $13,000 surprise tax bill in April. Most tech workers in their first year of significant RSU vesting are blindsided by this. Solution: increase W-4 withholding via your regular paycheck, or make quarterly estimated payments, to cover the gap between the flat 22% RSU withholding rate and your true marginal tax rate.

What's the difference between Sell-to-Cover and Same-Day Sale vs Hold?

Three common approaches at vest: (1) SELL TO COVER — automatic sell of just enough shares to cover the 22% withholding. Keep remaining shares. Tax exposure remains for the under-withheld portion. (2) SAME-DAY SALE — sell ALL vested shares immediately. Cost basis = vest price, so essentially $0 capital gain (maybe small loss from execution slippage). Use proceeds to pay full tax + diversify. RECOMMENDED for concentrated single-stock positions. (3) HOLD ALL SHARES — keep all vested shares. You owe the same tax regardless of whether you sell, so holding all shares means paying that tax bill out of other cash while keeping full exposure to a single company's stock price.

What's the key thing to understand about Concentrated Position Risk?

Single-stock concentration is the #1 wealth-destruction risk for tech, finance, and biotech employees. Examples: Enron employees with 401(k) in company stock lost retirement and job same day. Theranos, Yahoo, Sears, Lehman, Bed Bath Beyond employees similar stories. Rule of thumb: no single company stock should exceed 10-15% of your net worth. RSUs make this hard — you receive shares quarterly or annually, and they pile up. Strategy: same-day-sale at every vest, redeploy proceeds into diversified index funds, rather than letting an ever-growing single-stock position accumulate unchecked.