Restricted Stock Unit (RSU) Tax Withholding Calculator

Accurately determine your equity compensation tax obligations.

How to Use the RSU Tax Calculator

1. Enter the Number of RSUs Vesting: Input the number of RSUs that will vest.
2. Input the Expected Share Price at Vesting: Provide the anticipated stock price per share when the RSUs vest.
3. Select Your Marital Status: Choose “Single” or “Married Filing Jointly” to align with 2025 federal tax brackets.
4. Enter Your Total Salary and Cash Bonus: Include your annual salary and any cash bonuses to calculate your total income.
5. Provide Your State Tax Rate: Enter your state’s income tax rate as a percentage (e.g., 5% for California’s average rate).
6. Optional Federal Tax Bracket Override: If you know your effective federal tax rate, enter it; otherwise, the calculator estimates it based on your income.
7. Click “Calculate Tax Impact”: View the results, which include total RSU value, federal tax rate, taxes due, taxes withheld, and any shortfall.

Understanding the RSU Tax Withholding Results

The calculator provides the following outputs:

• Total RSU Value at Vesting: The total value of the shares received, calculated as the number of RSUs multiplied by the share price.
• Federal Tax Rate: The estimated federal tax rate applied to your RSU income, either calculated using 2025 tax brackets or based on your override input.
• Estimated Taxes Due from Vesting RSUs: The total tax liability, including federal income tax (based on your tax bracket), Social Security tax, Medicare tax, and state income tax (using the flat rate you provided).
• Estimated Taxes Withheld from Vesting RSUs: The taxes your employer is likely to withhold, including federal income tax at 22%, Social Security tax, and Medicare tax. Note that this does not include state income tax withholding, as rates and practices vary by state.
• Anticipated Tax Shortfall: The difference between taxes due and taxes withheld. This includes any additional federal tax (if your rate exceeds 22%) and the full state tax amount, as state withholding is not included in this estimate.

How RSU Withholding Tax is Calculated | Practical Examples

Consider an employee with the following details:

• Number of RSUs Vesting: 100
• Share Price at Vesting: $150
• Marital Status: Single
• Total Salary + Cash Bonus: $120,000
• State Tax Rate: 5%
• Federal Tax Bracket Override: None

Calculations:

• Total RSU Value: 100 × $150 = $15,000
• Total Income: $120,000 (salary) + $15,000 (RSUs) = $135,000
• Federal Tax on RSU: The $135,000 total income falls in the 24% bracket for single filers in 2025 ($103,351–$197,300). Thus, $15,000 × 24% = $3,600.
• Social Security Tax: $15,000 × 6.2% = $930 (since $135,000 < $176,100, the 2025 Social Security limit).
• Medicare Tax: $15,000 × 1.45% = $217.50 (no additional Medicare tax, as $135,000 < $200,000 for single filers).
• State Tax: $15,000 × 5% = $750
• Total Estimated Taxes Due: $3,600 + $930 + $217.50 + $750 = $5,497.50
• Estimated Taxes Withheld:
  • Federal withholding: $15,000 × 22% = $3,300
  • Social Security: $930
  • Medicare: $217.50
  • Total withheld: $3,300 + $930 + $217.50 = $4,447.50
• Anticipated Tax Shortfall: $5,497.50 – $4,447.50 = $1,050

This shortfall includes:

• Federal tax difference: $3,600 – $3,300 = $300
• State tax: $750 (not included in withheld amount)

In practice, your employer may withhold state taxes, reducing the actual shortfall.

For example, if a 5% state tax ($750) is withheld, the shortfall would be $300 (federal tax difference only). This calculator provides a conservative estimate to help you plan.

What are RSUs?

Restricted Stock Units (RSUs) are a form of compensation offered by companies to employees.

RSUs represent the right to receive shares of the company’s stock at a future date, typically after meeting vesting conditions, such as remaining employed for a specified period.

Unlike stock options, RSUs do not require an exercise price; they are granted as units that convert into actual shares upon vesting.

RSUs are commonly used in industries like technology to attract and retain talent, often comprising 20-30% of total compensation in tech firms.

How are RSUs Taxed?

When RSUs vest, the fair market value of the shares is considered taxable income, reported on your W-2.

This income is subject to federal and state income taxes, as well as payroll taxes (Social Security and Medicare). Here’s a breakdown:

• Federal Income Tax: RSUs are taxed as ordinary income. Employers typically withhold federal taxes at a flat rate of 22% (or 37% for amounts over $1 million), but your actual tax rate depends on your total income and tax bracket, which could be higher (e.g., 24% or 32%).
• State Income Tax: Most states tax RSU income at rates varying from 0% (e.g., Texas, Florida) to over 10% (e.g., California). Some states have progressive tax systems, which this calculator simplifies by using a flat rate you provide.
• Payroll Taxes: RSUs are subject to Social Security tax (6.2% up to a 2025 limit of $176,100) and Medicare tax (1.45%). High earners (over $200,000 for single filers or $250,000 for married filing jointly) may also owe an additional 0.9% Medicare tax.
• Withholding: Employers often use a “sell-to-cover” strategy, selling a portion of vested shares to cover taxes. The withheld amount may not match your actual tax liability, leading to a shortfall or overpayment when you file your taxes.

Why Use the RSU Tax Withholding Calculator?

The RSU Tax Withholding Calculator estimates the total taxes owed on your vesting RSUs and compares them to the amount your employer withholds.

This helps you identify potential tax shortfalls, allowing you to adjust withholdings (via Form W-4) or make estimated tax payments to avoid penalties or a large tax bill.

For example, if your actual federal tax rate is 24% but only 22% is withheld, you’ll owe the difference, plus any state taxes not fully withheld.

Key Statistics on RSUs

• Prevalence: RSUs are a staple in tech and high-growth industries, often making up 20-30% of total compensation for employees in these sectors.
• Tax Withholding: Approximately 70% of companies use the “sell-to-cover” method, selling a portion of vested RSUs to cover taxes.
• Tax Shortfalls: Employees in higher tax brackets (e.g., 24% or above) frequently face tax shortfalls due to the standard 22% federal withholding rate.

Comparison with Other Compensation

Unlike cash bonuses, which are taxed similarly but paid immediately, RSUs are taxed only upon vesting, and their value depends on the stock price at that time.

Compared to stock options, RSUs are simpler, as they don’t require an exercise price, but they lack the potential for tax deferral available with certain options under IRS rules.

Important Note

This calculator provides estimates only and assumes a flat state tax rate.

It does not account for deductions, credits, progressive state taxes, local taxes, or other factors like the Alternative Minimum Tax (AMT).

For accurate tax planning, consult a tax professional, as individual circumstances vary.

Get the Most from This RSU Tax Calculator

The RSU Tax Withholding Calculator is a valuable tool for employees receiving RSUs, helping you estimate tax obligations and identify potential shortfalls.

By understanding the tax impact of vesting RSUs, you can make informed decisions about adjusting withholdings or setting aside funds for taxes.

Always seek professional advice to ensure your tax strategy aligns with your financial goals.

By using this tool as a first step and pairing it with expert advice, you’ll stay ahead of your RSU tax obligations and avoid costly surprises.

FAQs About RSU Tax Withholding

What happens to my RSUs if I quit my job before they are ready for me to own them?

You lose the RSUs that aren’t ready yet if you quit before they are. You keep any RSUs that have already become yours.

For example, if you were supposed to get 100 shares after 4 years but quit after 2, you might only get 50 shares if they were ready.

Can I decide how much money is taken out for taxes when my RSUs become mine?

Yes, you can tell your company to take out more or less for taxes when your RSUs become yours.

You can fill out a form called a W-4 or ask your company during special times, like in June or December, to change the amount.

Do I have to pay taxes on my RSUs even if I don’t sell the shares?

Yes, you have to pay taxes when your RSUs become yours, even if you don’t sell them.

The tax is based on how much the shares are worth when you get them, like if 100 shares are worth $10 each, you pay tax on $1,000.

If the price of the stock goes down after my RSUs become mine, do I still pay the same taxes?

Yes, you pay taxes based on how much the RSUs were worth when they became yours, even if the price goes down later.

For example, if your shares were worth $1,000 when you got them but drop to $500, you still pay tax on $1,000.

Can I use my RSUs to pay my taxes?

Sometimes, your company might sell some of your RSUs to pay the taxes for you, but you can’t usually use them directly.

This is called “sell to cover,” where they sell just enough shares to cover the tax bill.

Do different countries have different rules for taxing RSUs?

Yes, each country has its own rules for taxing RSUs.

For example, in the U.S., you pay taxes when the RSUs become yours, but in some countries, you might pay when you sell them.

If I have RSUs from more than one company, how do I pay taxes on them?

You pay taxes on each set of RSUs separately, based on when they become yours and how much they are worth at that time.

If you have RSUs from two companies, you add up the value of each when they vest for your taxes.

What’s the difference between taxes on RSUs and taxes when I sell them?

Taxes on RSUs are for when they become yours, and taxes when you sell them are for any profit or loss you make.

For example, you pay tax on $1,000 when 100 shares vest at $10 each, but if you sell them later for $1,200, you pay extra tax on the $200 profit.

Can I get some money back on my taxes if my RSUs lose value?

Yes, if you sell your RSUs for less than they were worth when they became yours, you might be able to claim that loss on your taxes.

For example, if your shares were worth $1,000 when they vested but you sell them for $800, you might claim a $200 loss.

Can having RSUs help me get a loan or buy a house?

RSUs might show you have some value, but banks might not count them much because they can change in value and might not be yours yet.

For example, if your RSUs are worth $10,000 but aren’t vested, a bank might not count them when deciding if you can borrow money.