RSU Tax Guide: How Restricted Stock Units Are Taxed at Vesting (2026)

Restricted stock units generally become taxable compensation when they vest. The fair market value of the vested shares is ordinary wage income, even if you keep the shares instead of selling them.

Taxes at Vesting

Employers commonly withhold federal income tax using the current supplemental withholding rate (see IRS Publication 15). Social Security, Medicare, and applicable state withholding can also apply.

Selling Shares After Vesting

After vesting, a later sale can create a capital gain or loss based on the difference between the sale price and your tax basis. Vesting income and post-vesting investment gain are separate tax events.

Plan Around Vest Dates

Review upcoming vest dates, your employer's sell-to-cover process, and your year-to-date withholding. Large grants can justify help from a qualified tax professional.

RSUs as compensation at vesting

Restricted stock units represent a promise of company shares that convert to actual stock on vest dates. For tax purposes, the fair market value of shares on the vest date is ordinary wage income — even if you hold the shares and do not sell.

Withholding at vest

Employers typically withhold federal income tax using supplemental wage methods under IRS Publication 15-T, plus FICA. Social Security is 6.2% up to the annual wage base; Medicare is 1.45% on all vest income. State withholding applies in states that tax wages progressively.

Sell-to-cover and net shares

Many employers automatically sell a portion of vested shares to cover withholding taxes — called sell-to-cover. You receive net shares after withholding even though the full vest value was taxable income. Review your vest statement for gross income, withholding, and net shares delivered.

Cost basis after vesting

Your tax basis in RSU shares equals the ordinary income reported at vest — the fair market value on the vest date. This basis matters when you later sell shares. Gain or loss after vest is capital gain/loss, not ordinary wage income.

Capital gains on later sale

Selling vested shares above basis produces capital gain; selling below basis produces capital loss (subject to capital loss rules). Holding period for long-term capital gains treatment starts at vest for RSUs — not at grant.

Planning around vest dates

Large vest events can push you into higher withholding tiers and trigger additional Medicare tax on wages above IRS thresholds. Consider increasing pre-tax 401(k) contributions in vest years to offset taxable wage spikes. See stock options tax guide for equity types with different tax timing.

Multi-state and remote workers

RSU income may be sourced to the state where you performed work when shares vest. Remote workers should verify state sourcing with a qualified professional — calculator defaults model single-state resident scenarios.

Tools and related content

RSU tax calculator, bonus tax withholding, and 401(k) contribution tax savings help model vest-year paycheck impact.

Frequently Asked Questions

Form W-2 reporting for RSUs

Vest income appears in W-2 Box 1 wages with withholding in Boxes 2, 4, and 6 for federal, Social Security, and Medicare. Verify vest income matches your grant statement and that withholding credits appear on your annual return.

Estimated tax for large vests

When sell-to-cover does not fully cover liability — or for RSUs at private companies with limited sell-to-cover — you may need additional estimated payments. Consult a qualified professional for large single-year vest events.

Frequently Asked Questions

Figures and methods are based on official-source data encoded in the calculator. Not tax advice. Review the methodology and consult a qualified professional for your situation.