How the RSU Tax Calculator Works
Restricted Stock Units (RSUs) are one of the most common forms of equity compensation at public tech companies — Amazon, Google, Meta, Microsoft, and thousands of others use them. But many employees are caught off guard by how much of their vest value goes to taxes. This free RSU tax calculator does the math for you using the latest 2026 IRS rates and your state's withholding rules.
Here is what the calculator needs from you:
| Input | Why It Matters |
|---|---|
| Shares vesting | Determines gross vest value |
| Share price (FMV) | Fair market value on vest date — sets your taxable income and cost basis |
| Annual base salary | Needed to check Social Security wage base status ($176,100 for 2026) |
| Filing status | Affects additional Medicare tax threshold ($200,000 single / $250,000 MFJ) |
| State | Each state has different income tax withholding rates on RSU income |
| Prior YTD RSU income | Determines if the 37% federal rate kicks in above $1,000,000 |
Once you click Calculate, the tool returns your gross vest value, each tax component broken out line-by-line, total withholding, estimated net take-home value, and the number of shares your employer will likely sell under a sell-to-cover arrangement.
How RSU Tax Is Calculated — The Complete 2026 Guide
The IRS treats RSU vesting as a taxable compensation event. The moment your shares vest, the fair market value of those shares is added to your ordinary income — just like a paycheck. Your employer is required to withhold the following taxes:
Federal Income Tax Withholding (Supplemental Rate)
For supplemental wages (which RSUs are), the IRS allows employers to use the flat supplemental withholding method:
- 22% on RSU income up to $1,000,000 cumulative in 2026
- 37% on RSU income above $1,000,000 in a calendar year
Note: The 22% flat rate may under-withhold for high earners in the 32%, 35%, or 37% marginal brackets. If you're in that situation, consider updating your W-4 or making estimated quarterly payments. Use our W-4 withholding calculator to adjust.
Social Security Tax (OASDI)
The Social Security tax rate is 6.2% on wages up to the annual wage base. For 2026, that wage base is $176,100 (up from $168,600 in 2025 per IRS Revenue Procedure 2025-32). If your salary + prior RSU income has already exceeded $176,100 before this vest, you owe $0 in Social Security on this vest. Our calculator checks this automatically.
Medicare Tax
All RSU income is subject to Medicare taxes:
- 1.45% standard Medicare on all wages (no wage base cap)
- 0.9% Additional Medicare Tax (ACA surtax) on wages above $200,000 (single filers) or $250,000 (married filing jointly) — this is not withheld by employers on a per-event basis but will be assessed on your annual return
State Income Tax
State tax depends entirely on your state of residence. Nine states have no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming), while California tops out at 13.3%. See the California paycheck calculator for a detailed CA breakdown.
2026 RSU Tax Withholding Rates at a Glance
| Tax Type | Rate | Wage Cap |
|---|---|---|
| Federal (supplemental) | 22% / 37% | $1,000,000 threshold |
| Social Security | 6.2% | $176,100 (2026) |
| Medicare | 1.45% | No cap |
| Add'l Medicare (ACA) | 0.9% | Above $200K (single) |
| CA State (example) | 10.23% | Supplemental rate |
| NY State (example) | 11.70% | Supplemental rate |
| TX / FL / WA | 0% | No state income tax |
Source: IRS Rev. Proc. 2025-32 (federal); state revenue agencies (state rates).
Real-World RSU Tax Calculation Example
Let's say you're a software engineer in California. 500 RSUs vest on March 1, 2026. Your company's stock price (FMV) on that date is $80.00/share. Your base salary is $160,000 and no RSUs have vested yet this year.
⚠️ Note: 22% federal withholding may under-withhold if you're in the 32%+ bracket. You may owe additional tax at filing.
How to Calculate RSU Cost Basis
One of the most common RSU tax mistakes is paying double tax on the gain. Here's how RSU cost basis works and how to calculate it correctly.
What Is RSU Cost Basis?
Your cost basis for RSU shares is the fair market value of the shares on the vest date — the exact amount already reported as ordinary income on your W-2. It is not $0, even though you paid nothing out of pocket for the shares.
Cost Basis Formula
Cost Basis = Number of Shares Retained × FMV per Share at Vest
How to Calculate Adjusted Cost Basis for RSU Sale
If your broker reports cost basis as $0.00 on Form 1099-B, that's wrong — this happens when the brokerage doesn't have the vest-date FMV on file. If you accept that $0 cost basis, you'll pay capital gains tax on the entire sale proceeds, effectively double-taxed (once as income at vest, once as capital gain at sale).
To fix this, adjust your cost basis on Schedule D / Form 8949 using the FMV from your W-2 or a trade confirmation from your broker. Most brokerage firms (Fidelity, E*TRADE, Schwab) now provide supplemental RSU tax statements that show your vest-date cost basis.
Cost Basis After Sell-to-Cover
When your employer uses sell-to-cover, the cost basis for the shares they sold equals the FMV at vest (same as all other vested shares). The proceeds from the sold shares typically result in a minimal gain or loss (they're sold almost immediately at vest price). Your brokerage will report these on Form 1099-B.
RSU Capital Gains Tax — Short-Term vs. Long-Term
After your RSUs vest, you have a choice: sell immediately or hold. This decision has significant tax consequences.
How to Calculate Capital Gains on RSU Shares
Capital Gain / Loss = Sale Price − Cost Basis (FMV at Vest)
If you sell immediately at vest, your capital gain is $0 (or a tiny amount due to intraday price movement). If you hold and the stock appreciates, you'll have a taxable gain when you eventually sell.
| Holding Period | Tax Type | 2026 Rate |
|---|---|---|
| ≤ 12 months from vest | Short-term capital gain | Ordinary income rate (10%–37%) |
| > 12 months from vest | Long-term capital gain | 0%, 15%, or 20% |
| High earners | Net Investment Income Tax (NIIT) | +3.8% on investment income |
Long-term capital gains rates for 2026: 0% for income up to $47,025 (single) / $94,050 (MFJ); 15% up to $518,900 (single); 20% above that threshold. High-income taxpayers may also owe the 3.8% Net Investment Income Tax (NIIT). Use our capital gains tax calculator for a detailed projection.
💡 Tax Planning Insight
If you hold RSU shares for 12+ months after vesting, you convert future appreciation from ordinary income rates (up to 37%) to long-term capital gains rates (0–20%). On a $50,000 gain, that difference could save you $8,500–$17,000. However, you take on stock concentration risk by holding. Consider your overall portfolio allocation before deciding.
Sell-to-Cover Calculator: How Many Shares Will Be Sold?
Most public companies handle RSU tax withholding via sell-to-cover: they automatically sell enough of your vested shares to cover the tax withholding amount, then deposit the remaining shares into your brokerage account.
Sell-to-Cover Formula
Shares Sold = Total Tax Withholding ÷ FMV per Share (rounded up)
Using the earlier example ($40,000 vest, $15,952 withholding, $80 share price):
Shares Sold = $15,952 ÷ $80 = 200 shares (rounded up)
Shares Retained = 500 − 200 = 300 shares
Other Withholding Methods
While sell-to-cover is most common, some companies use same-day sale (sell all shares, get cash minus taxes) or cash withholding (employee pays taxes out of pocket from other funds to keep all shares). Check your equity plan documents or employer's stock administration portal (Fidelity NetBenefits, E*TRADE, Schwab Equity Awards) to confirm which method applies to you.
RSUs vs. Stock Options: Which Is Better?
RSUs and stock options are both forms of equity compensation, but they work differently and have different tax implications. Here's a side-by-side comparison:
| Feature | RSUs | Stock Options (NSOs/ISOs) |
|---|---|---|
| Taxed when | Shares vest | NSO: at exercise; ISO: at sale |
| Value at grant | Always > $0 | Only if stock price > strike price |
| Upside potential | Proportional to stock gains | Leveraged (higher upside, higher risk) |
| Risk | Lower | Higher (can expire worthless) |
| Best for | Established/public companies | Startups / pre-IPO companies |
| Tax complexity | Moderate | High (especially ISOs + AMT) |
| Withholding | Automatic at vest | Required at NSO exercise |
For employees at major tech firms (Amazon, Google, Meta, Apple, Microsoft), RSUs are the standard. At startups and pre-IPO companies, stock options are more common. Neither is universally "better" — it depends on company stage, your tax situation, and your risk tolerance.
RSU State Income Tax by State
State tax on RSU income varies dramatically. Here are the most important states for tech employees to know:
Select your state in the RSU tax calculator above to get the correct withholding estimate for your location. See also our paycheck calculator for a full salary take-home breakdown.
How to Calculate RSU Income for a Mortgage
Tech employees with significant RSU income often wonder if lenders will count those vest payments toward qualifying income for a home loan. The answer is: yes, but with conditions.
Fannie Mae Guidelines for RSU Income
Fannie Mae (FNMA) allows RSU income as qualifying income when:
- The borrower has received RSU income for at least 2 years
- The employer confirms the income is expected to continue
- The income is documented on 2 years of W-2s and tax returns
Qualifying Income Formula (Fannie Mae): Average of 24 months of RSU income ÷ 12 = monthly qualifying income. If your RSUs vested irregularly (e.g., a new hire grant front-loaded in year 1), lenders may only use the lower of current or average.
Freddie Mac RSU Income Calculation
Freddie Mac (FHLMC) follows similar guidelines but requires the stock to be publicly traded and the vesting schedule to be documented. Freddie Mac also requires that the income is expected to continue for at least 3 years.
📋 RSU Income Documentation Checklist for Mortgage
- ✓2 years of federal tax returns (W-2 showing RSU income in Box 12 or included in Box 1)
- ✓Most recent pay stubs showing YTD RSU income
- ✓RSU grant agreements or vesting schedule from your equity plan
- ✓Employer letter confirming continuation of RSU program
- ✓Brokerage statements showing vest history
7 RSU Tax Planning Tips to Maximize Your Net Value
New Hire RSU Grant: Understanding Your Vesting Schedule
When you join a company that offers RSUs, your offer letter includes a total grant value and a vesting schedule. The most common vesting structure at large tech companies is a 4-year schedule with a 1-year cliff:
- 25% of shares vest after 12 months (the "cliff")
- Remaining 75% vest quarterly over the next 3 years (6.25% per quarter)
New hire RSU grant calculation example: You receive a $200,000 RSU grant when stock is at $100/share = 2,000 shares. After 1 year, 500 shares vest (25%). If the stock is now $120/share, you receive $60,000 of ordinary income (not $50,000 — the value at vest, not at grant, is what matters).
This is why RSU grant values in offer letters are estimates, not guarantees. The actual value depends on the stock price on each vest date.
Related Calculators
Official Government Sources
- IRS Topic 427: Stock Options — IRS guidance on equity compensation tax treatment
- IRS Publication 525: Taxable and Nontaxable Income — Covers RSU, stock bonus, and other compensation income
- SEC Investor Bulletin: Restricted Securities — Official SEC guidance on restricted stock and holding requirements