Restricted stock units are one of the most valuable — and most misunderstood — forms of compensation. The confusion almost always comes down to two moments: when the shares vest, and when you sell. They're taxed differently, and conflating them is how people get blindsided by a bill.

Estimate the tax on your next vest with the RSU tax calculator, then read on for the full picture.

RSU % $ VEST vs. SELL
Two separate taxable moments: ordinary income at vesting, capital gains only on later growth.

RSUs are taxed as ordinary income at vesting

When your RSUs vest, the fair-market value of the shares on that date is treated as ordinary wage income — exactly like a cash bonus of the same size. It shows up on your W-2 and is subject to federal income tax, FICA, and state tax.

Example: 100 shares vest at $150. That's $15,000 of ordinary income added to your wages this year, whether or not you sell a single share.

The 22% withholding trap

Because vesting is a supplemental-wage event, employers typically withhold federal tax at the flat 22% supplemental rate (37% above $1 million). For many tech and finance employees, 22% is well below their actual marginal rate of 32% or 35%.

The gap that bites: if your marginal rate is 35% but only 22% was withheld, you're under-withheld by 13 points on every vested dollar — and that shortfall lands as a tax bill the following April.
WITHHELD vs. OWED10% 12% 22% 24% 32%
For high earners, 22% withholding leaves a gap that becomes a tax-time bill.

The tax-time true-up

'True-up' is just the reconciliation that happens when you file. Your return adds the vested value to all your other income, applies your real marginal rate, and compares it to what was withheld. If withholding fell short, you pay the difference; if it was generous, you get it back.

Smart move: if you expect a large vest, consider increasing other withholding via your W-4 or making an estimated payment so the true-up isn't a shock. See the W-4 guide.

What happens when you sell

Here's where the second taxable moment appears. Your cost basis is the value at vesting (the amount you already paid ordinary tax on). When you sell:

  • Sell immediately at vest price: no further gain — basis equals sale price.
  • Hold and sell higher: the increase is a capital gain, taxed at short-term (ordinary) rates if held under a year, or lower long-term rates after a year.
  • Hold and sell lower: the decrease is a capital loss you can use to offset gains.

Our capital gains guide covers the holding-period rules in detail.

Planning moves that actually help

  • Cover the withholding gap with extra W-4 withholding or quarterly estimates.
  • Decide your sell strategy in advance — selling at vest avoids concentration risk in your employer's stock.
  • Mind the wash-sale and concentration risk if you keep buying through an ESPP at the same time.
RSU taxation interacts with your whole financial picture. This is educational information, not personalized tax advice.

Frequently asked questions

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Are RSUs taxed twice?

Not exactly. They're taxed once as ordinary income at vesting, then capital gains tax applies only to additional gain if the shares rise before you sell. Your vesting price becomes your cost basis.

Why do I owe taxes on RSUs I didn't sell?

Vesting itself is a taxable event — the IRS treats the shares' value as wages, whether or not you sell. Withholding may not fully cover it.

Should I sell RSUs as soon as they vest?

Selling immediately means no additional capital gain or loss, since the price equals your basis. Many people do this to diversify, but it's a personal decision — consider speaking with an advisor.